Gold falls as rate hike views steady dollar

Reuters
Bengaluru, Karnataka, India Published: Aug 23, 2018, 07:34 AM(IST)

Representative image. Photograph:( Reuters )

Gold prices edged down on Thursday, after hitting their highest in over a week in the previous session, as the dollar steadied on expectations of rising US interest rates.

Spot gold was down 0.3 per cent at $1,191.87 an ounce at 0102 GMT, after hitting $1,201.51, its highest since August 13 in the previous session.

US gold futures were down 0.3 per cent at $1,200 an ounce.

US central bankers discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households, minutes of the Federal Reserve's last policy meeting showed on Wednesday.

The Fed has been raising rates gradually since 2015 and policymakers are now concerned the economy is so strong that inflation could rise persistently above the central bank's 2 per cent target.

Rising interest rates lift the opportunity cost of holding non-yielding metal while boosting the dollar, in which it is priced.

The dollar index against a basket of six major currencies <.DXY> was up 0.2 per cent at 95.308, after falling to its lowest in nearly three weeks at 94.934 on Wednesday. 

US President Donald Trump's displeasure with rising interest rates had weighed on the dollar ahead of the Fed's minutes and its annual economic symposium in Jackson Hole, Wyoming, which will begin on Friday.

The dollar came under pressure on Wednesday as political pressure on President Trump increased with two of his former advisers facing possible prison sentences that could hurt his Republican Party's November midterm election prospects and widening a criminal investigation that has overshadowed his presidency.

The weak dollar during the US trading session, helped gold to touch its highest in a week on Wednesday.

US and Chinese officials met for the first time in over two months to find a way out of their deepening trade conflict, but there was no evidence the low-key discussions would halt a new round of US tariffs due Thursday.

President Trump may be unhappy with the Federal Reserve's interest rate hikes, but it is a different Fed program that may weigh on the fate of his economic policies as the central bank shrinks its crisis-era bond holdings with no clear sign of when it will stop.

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