Weaker dollar a boon to gold prices

Bengaluru — Gold prices rose on Wednesday on a softer dollar, though investors refrained from placing big bets ahead of an important US Federal Reserve policy statement that could provide cues on its pace of interest-rate hikes.

Spot gold was up 0.2% at $1,650.62 per ounce, as of 3.56am GMT, while US gold futures gained 0.3% to $1,653.80.

The dollar index dipped 0.2%, making the greenback-priced gold less expensive for holders of other currency.

“If we do get any sort of story for US dollar weakness over that 50-basis-point [bps] hint from the Fed, then it shouldn’t be too hard for gold to get back up to $1,670, $1,680 even over the coming sessions,” said City Index analyst Matt Simpson.

The US Fed is scheduled to release its policy statement at 6pm GMT followed by chief Jerome Powell’s press conference.

While a 75 bps rate increase is largely priced in, investors will seek cues on whether there is a possibility of the Fed slowing down its tightening pace.

For the December meeting, the traders are split on the odds of a 75 bps or 50 bps rate hike.

“The bigger picture is that the Fed is still going to continue hiking rates, they could be up to 5%, but we’re still close at the end of that hiking cycle,” Simpson added.

Data on Tuesday showed US job openings unexpectedly rose in September, highlighting a resilient labour market and that rapid interest-rate hikes have yet to bite hard in the real economy.

Higher interest rates increase the opportunity cost of holding non-yielding gold.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 1.45 tonnes to 919.12 tonnes on Tuesday.

Spot silver rose 0.1% to $19.68 per ounce, having hit a three-week peak on Tuesday.

Platinum gained 0.9% to $951.50 and palladium climbed 1.4% to $1,905.99.

Reuters