Bengaluru: Gold prices slipped on Thursday as the dollar firmed on hawkish comments from US Federal Reserve officials that stoked expectations of a US interest rate hike in March.
Spot gold fell 0.2% to $1,246.14 per ounce by 8.25am. On Monday, the metal rose to $1,263.80, its highest since 11 November.
US gold futures fell 0.3% to $1,246.60.
The dollar index, a measure of the greenback against a basket of six other major currencies, was up 0.1% at 101.910. On Wednesday, it reached 101.97, the highest since 11 January.
Higher US interest rates would diminish demand for non-interest bearing gold while a higher dollar makes the yellow metal more expensive for buyers using other currencies.
“Much of the recent strength we are seeing in the dollar is more attributable to an abrupt about-face in terms of what the markets are expecting from the Federal Reserve’s March meeting,” said INTL FCStone analyst Edward Meir.
Despite the hawkish rate backdrop, gold has been performing impressively considering that the US equity markets also surged to new highs, Meir added.
The Dow Jones Industrial Average blasted through the 21,000-point mark for the first time. Both the Dow and the S&P 500 rallied around 1.4%.
US consumer spending cooled in January as demand for automobiles and utilities fell, but inflation recorded its biggest monthly increase in four years, another reason for the Fed to hike interest rates this month.
Fed Governor Lael Brained on Wednesday said that it may be “appropriate soon” to raise interest rates as the global economy seems to have turned a corner.
More Fed policy-setters, including Chairwoman Janet Yellen and vice chairman Stanley Fischer, will speak on Friday, likely providing further signals on the Fed’s policy path ahead of the 14-15 March meeting.
Spot gold may retest a resistance at $1,252 per ounce, a break above which could lead to a gain to the next resistance at $1,258, according to Reuters technical analyst Wang Tao.
“If we look at gold’s performance over the course of the last five trading sessions, prices have hardly dropped at all, telling us that funds remain committed to the precious metal in light of what they view to be an uncertain US legislative outlook,” Meir said.
“In addition, funds do not want to get too short ahead of the critical French elections.”
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.28% to 843.54 tonnes on Wednesday from 841.17 tonnes on Tuesday.
Spot silver fell 0.2% to $18.38 an ounce.
Platinum was down 0.2% at $1,012.70, while palladium dropped 0.2% to $773.50. Reuters
