Picture: REUTERS
Picture: REUTERS

Bengaluru — Gold slipped on Wednesday as the dollar held near a one-week high on the back of better-than-expected retail sales data from the US, while investors waited for direction on interest rates from the US Federal Reserve.

Spot gold fell 0.3% to $1,401.60 an ounce as of 8.53am GMT. Prices were on track for a third straight session of falls as robust data trimmed expectations of an aggressive interest rate cut by the Fed. US gold futures for August delivery shed 0.6% to $1,403.10.

“We’re seeing a delayed reaction [in gold] considering yesterday’s movement in the foreign exchange market,” said Quantitative Commodity Research analyst Peter Fertig. “It is crucial for gold to hold above $1,400. If prices fall slightly below this level, we should see some buying interest coming in and pushing prices higher.”

The dollar index against a basket of six major currencies was effectively unchanged at 97.365 after gaining 0.5% the previous day following a rise in US retail sales numbers. The US currency held near a one-week high.

The data dampened expectations that the Fed could cut interest rates by 50 basis points (bps) rather than 25 bps at its month-end policy review.

Chicago Fed president Charles Evans, meanwhile, said on Tuesday that an interest rate cut of a half a percentage point at the US central bank’s July 30-31 policy meeting could mean that the Fed’s inflation goal is reached sooner.

Investors now await the Fed’s “Beige Book” later in the day for insight on how trade tensions are affecting the business outlook.

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion. They also boost the dollar, in which the metal is priced.

In the latest on the trade row, US President Donald Trump said on Tuesday that the US still has a long way to go to conclude a deal with China but could impose tariffs on an additional $325bn worth of Chinese goods if needed.

“Gold remains locked within the $1,400-$1,420 range, while more broadly we look for a move outside of $1,380-$1,440 for medium-term direction,” trading firm MKS PAMP said in a note.

Meanwhile, silver held steady at $15.56 an ounce, extending gains for a fourth straight session. It hovered close to a more than four-month high of $15.69. Platinum fell 0.4%, to $834.86 an ounce while palladium dropped 0.5% to $1,517.