Gold dips, unable to sustain brief bounce up after Fed minutes released

NEW YORK/LONDON — Gold dipped further on Wednesday, a day after its biggest daily slide in two-and-a-half months, but briefly bounced higher as the US dollar slipped for a short time after the release of minutes from the US Federal Reserve’s January policy meeting.

The Fed minutes were initially read as less hawkish than expected, which prompted the US dollar index to turn negative against a basket of currencies for a awhile.

“The minutes seemed to reveal a slightly more dovish Fed, which makes gold stronger and a softer dollar on the fear that deficits will take control rather than the Fed hiking rates,” said Rob Haworth, senior investment strategist for US Bank Wealth Management.

Spot gold lost 0.40% at $1,324.16 per ounce by 3:03 p.m. EST (2003 GMT). It dropped as low as $ 1,322.70. US April gold futures settled up 90 cents, or 0.10%, at $1,332.10 per ounce.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

The minutes also gave direction on inflation signals, said George Gero, managing director of RBC Wealth Management.

“Some Fed officials saw applicable risk (of ) inflation to lag (the) target,” he said. “Almost all Fed officials expected inflation to rise to (the) 2% goal.”

Inflation fears can boost gold’s appeal as a store of value against inflation, unless investors believe interest-rate hikes will succeed in stopping inflation in its tracks.

Gold prices have fallen more than 1% this week as the dollar bounced up off three-year lows. On Tuesday, bullion slid 1.3%, the most on any day since Dec. 7, as a rise in US yields boosted the dollar and 10-year US Treasury yields hovered near a four-year peak.

On Wednesday, Treasury yields rose in choppy trading after the Fed minutes affirmed expectations of further rate hikes this year.

Interest in physical gold has been muted this week during the Lunar New Year holiday across much of Asia, including China.

Silver rose 1.5% at $ 16.70 an ounce, up from a one-week low of $16.37, while palladium dropped 0.80% at $ 1,025 per ounce and platinum lost 1% at $990.24, off a $988 low. —