By Arpan Varghese
(Reuters) – Gold prices bounced above the key $1,750 level on Thursday, consolidating gains after minutes of the U.S. Federal Reserve’s latest policy meeting signalled slower interest rate hike.
Spot gold rose 0.3% to $1,754.49 per ounce by 0520 GMT. U.S. gold futures advanced 0.5% to $1,755.00.
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.
The minutes of the Fed’s Nov. 1-2 meeting showed that a “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.
“The FOMC minutes and the perceived response from markets that a slowing down of rate hikes – alongside the extreme seasonal pattern of buying in late November-December into end of the first quarter – has driven the metals markets higher into Asia,” said David Mitchell, managing director at Singapore’s Indigo Precious Metals.
Providing a further fillip to gold, the dollar was broadly lower following the Fed minutes, making bullion cheaper for overseas buyers.
However, rising real rates until early 2023 remained a challenging backdrop for non-yielding gold, ANZ analysts said in a note.
Fed fund futures are now pricing in an 85% chance of 50-basis point (bps) rate increase in the December meeting, after four straight 75 bps hikes.
But intensifying recessionary and geopolitical risks into 2023, robust emerging markets’ physical demand and record high purchases by central banks, which are trying diversify their foreign reserves, all suggest gold can still outperform against real rates, ANZ added.
Spot silver rose 0.2% to $21.55 per ounce, platinum added 0.2% to $998.50, while palladium gained 0.7% to $1,893.38.
Market activity was likely to be relatively muted by the U.S. Thanksgiving holiday.
GRAPHIC: Gold technicals (https://fingfx.thomsonreuters.com/gfx/ce/xmvjkojdzpr/Pasted%20image%201669259068129.png)
(Reporting by Arpan Varghese in Bengaluru; Editing by Rashmi Aich and Savio D’Souza)
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