— Gold inched up on Friday, en route to a weekly gain, buoyed by the dollar’s retreat on a perceived dovish tilt in the US Federal Reserve’s interest rate hike strategy.
Spot gold gained 0.2% to $1,758.41/oz by 2.23am GMT, and was up 0.5% so far this week. US gold futures rose 0.7% to $1,758.30.A “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of rate hikes, the readout of the November 1-2 meeting showed on Wednesday.
But the December Federal Open Market Committee meeting will be a “black box” event given the variation in projections before and after recent cooler-than expected US inflation data, leaving gold sensitive to upcoming data as buyers look “for greater conviction that current rate hike expectations are well-anchored”.
A majority of traders expect a 50 basis point rate increase at the Fed’s December meeting, while chances of a 75 bps hike were pegged at about 34.5%. High interest rates have kept a leash on gold’s traditional status as a hedge against high inflation and other uncertainties this year, as they translate into higher opportunity cost to hold the non-yielding asset.
Holdings of the largest gold-backed exchange-traded-fund, New York’s SPDR Gold Trust, have shed about 68 tonnes since the beginning of the year.
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