Gold creeps higher as spotlight falls on Fed’s rate hike decision

Bengaluru — Gold prices ticked up on Friday helped by a softer dollar, while investors braced for key US inflation data and Federal Reserve’s rate hike decision due next week.

Spot gold was up 0.2% at $1,793.16/oz, at 2.41am GMT, but fell 0.3% so far this week. US gold futures rose 0.2% to $1,804.80.

The dollar index was down 0.1%. A weaker dollar makes gold more attractive to buyers holding other currencies.

There is a real chance of upward accretion in gold as we head into next week’s Fed meet and consumer price index (CPI) data, said Clifford Bennett, chief economist at ACY Securities.

Market participants now expect a 93% chance of a 50 basis point rate hike at the Fed’s policy meeting on December 13-14. Investors will also watch out for the US CPI report for November due on December 13.

If the Fed slows the pace as per expectations, along with a relatively moderate CPI print, "then the dollar might weaken and all of a sudden you could see a perfect storm rushing over gold’s horizon,” Bennett added.

Lower interest rates tend to be beneficial for bullion as they decrease the opportunity cost of holding the non-yielding asset.

"Traders will care to see what the Fed has to say about the trend of inflation and where rates could peak,” Edward Moya, senior analyst with Oanda, said in a note.

"Gold looks like it will find a home at around the $1,800 level, until we have further indications.”

The number of Americans filing new claims for jobless benefits increased moderately last week, pointing to a still-tight and strong labour market despite growing fears of a recession.

Spot silver edged 0.6% higher to $23.20/oz, platinum rose 0.4% to $1,006.91. Palladium lost 0.4% to $1,918.50, but was headed for a second straight weekly gain.

Reuters