Gold struggles as investors await clues for further Fed rate hikes

Gold struggled for momentum on Wednesday, as investors awaited minutes from the US Federal Reserve’s last policy meeting that could offer clues on further interest rate hikes amid signs of easing inflation.

Spot gold was flat at $1,775.91 per ounce, as of 2.42am GMT, after hitting its lowest since August 8 at $1,770.86 on Tuesday. US gold futures edged 0.1% higher to $1,791.10.

“Focus is on minutes from the July federal open market committee (FOMC) meeting and the Jackson Hole Symposium on August 25-27. Both these events will set the stage for [the] Fed meeting in September,” said Ilya Spivak, a currency strategist at DailyFX.

“If we are going to get a more hawkish view from the Fed on rate hikes, that’s going to be somewhat negative for gold in terms of its core appeal for investors.”

The minutes of the Fed’s July 26-27 policy meeting are due at 6.00pm GMT. The US central bank has raised its benchmark overnight interest rate by 225 basis points (bps) since March to tame high inflation. Traders were pricing in about a 42.5% chance of a 75 (bps) rate hike and a 57.5% chance of a 50 bps increase at the Fed’s next meeting on September 20-21.

Though gold is seen as a hedge against inflation, rising US interest rates dull non-yielding bullion’s appeal.

Despite signs of easing inflation in the world’s largest economy, Fed officials have maintained a hawkish tone on future rate hikes that has led to a pullback in gold prices from the key $1,800 level. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 0.18% to 992.20 tonnes on Tuesday, its lowest since January.

The dollar, a rival safe-haven and that has a strong correlation with bullion, also held steady ahead of US retail sales data and Fed minutes.

Elsewhere, spot silver eased 0.1% to $20.09 per ounce, platinum fell 0.1% to $933.86 and palladium was steady at $2,152.33. 

Reuters