New York — Gold prices fell on Wednesday as the U.S. dollar strengthened and investors looked to the Federal Reserve’s September meeting minutes for fresh signals on the direction of U.S. interest rates.
Spot gold dropped 0.8% to $4,130.37 per ounce by 0627 GMT, while U.S. gold futures declined 0.7% to $4,157.00.
The dollar index advanced 0.3%, making gold and other dollar-denominated metals more expensive for buyers using other currencies. The move came ahead of the release of the Federal Open Market Committee’s latest meeting minutes later Wednesday.
Investors expect the minutes to offer more detail on the level of support among Federal Reserve officials for additional interest-rate increases.
Frank Walbaum, a market analyst at Naga.com, said gold was expected to remain relatively stable but with a modest downward bias. He said the Fed minutes could alter expectations for future rate hikes, while long-term Treasury yields, the dollar and oil prices could also influence bullion prices.
Recent remarks from U.S. central bank officials have underscored their continued focus on controlling inflation.
San Francisco Fed President Mary Daly said the need for further rate increases would depend largely on whether forces driving inflation higher eventually weaken or continue. Kansas City Fed President Jeff Schmid said rates still needed to move higher to reduce inflation.
While weaker recent economic data have lowered expectations for a rate increase in October, traders continued to price in an 88% probability of a hike by December, according to the CME’s FedWatch tool.
Higher interest rates can pressure gold because investors may favor yield-generating assets when borrowing costs and market rates are elevated.
Despite Wednesday’s decline, longer-term expectations for gold remained positive. Delegates at the London Bullion Market Association’s annual conference in Sorrento, Italy, projected that gold could reach $5,013 an ounce over the next 12 months.
China’s central bank also continued adding to its gold reserves in September, extending its buying streak to 23 consecutive months, official data showed.
Other precious metals also declined. Spot silver fell 1.9% to $60.54 an ounce, platinum lost 1.3% to $1,679.20 and palladium dropped 1.5% to $1,154.35.
Gold’s near-term direction is likely to depend heavily on signals from the Federal Reserve as investors balance inflation concerns against weaker economic data. For now, the stronger dollar and expectations of relatively high interest rates are weighing on the metal, while central-bank purchases and geopolitical uncertainty continue to provide longer-term support for demand.
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