Gold drops 1 per cent as dollar strengthens; Fed minutes awaited
Gold prices fell nearly 1 per cent on 7 October as the US dollar strengthened. Investors awaited US Federal Reserve minutes for clarity on rate-hike support. Market expectations for a December hike stood at 86 per cent, though a softer jobs report led most to expect no move in October.
Gold prices declined on Wednesday as a stronger US dollar weighed on the precious metal, while investors awaited the release of the Federal Reserve's September meeting minutes for clues on further interest rate rises.
Spot gold fell 0.98 per cent to US$4,122.73 per ounce by 0905 GMT. US gold futures for December delivery slid 0.91 per cent to US$4,149.00. The US dollar index rose 0.4 per cent, making greenback-denominated gold more expensive for holders of other currencies.
"There is also an element of caution ahead of the release of the latest Federal Open Market Committee minutes later today," said ActivTrades director and CEO Ricardo Evangelista. "Until there is greater clarity on that (support for rate hikes) front, there is probably some reluctance to take larger positions in gold."
After a softer US jobs data release, markets largely expect the Fed to hold rates steady in October, but still price in an 86 per cent chance of a hike in December, according to the CME's FedWatch tool. Higher interest rates diminish the attractiveness of non-yielding gold.
Kansas City Fed President Jeff Schmid said rates still need to rise to bring inflation down, while San Francisco Fed President Mary Daly said the decision would rest on whether factors pushing up inflation fade or persist. "The downside remains supported by geopolitical uncertainty, concerns over government debt and inflation, and central bank demand," Evangelista added.
International Monetary Fund Managing Director Kristalina Georgieva warned on Wednesday that the global economy faces risks from persistently high energy prices, record public debt and risks from the artificial-intelligence investment boom. Separately, delegates at the London Bullion Market Association's annual conference in Italy forecast that gold could reach US$5,013 an ounce over the next 12 months.
China's central bank stepped up its gold purchases in September, extending its buying streak to a 23rd consecutive month, official data showed. Among other precious metals, spot silver fell 2.2 per cent to US$60.3638 per ounce, platinum eased 3.0 per cent to US$1,650.45, and palladium lost 2.7 per cent to US$1,140.89.