Gold edges up on softer dollar; rate hike bets cloud outlook


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Gold edged up on Wednesday, helped by a

retreat in the dollar, but bets of steep rate hikes from the

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U.S. Federal Reserve kept a leash on further gains for the

non-yielding asset.

Spot gold rose 0.1% to $1,702.90 per ounce by 10:02

a.m. ET (1402 GMT). Gold marked its biggest one-day percentage

decline since July 14 on Tuesday, driven by the dollar’s rally

following a surprise rise in U.S. inflation.

U.S. gold futures fell 0.2% to $1,713.40.

The U.S. consumer price index unexpectedly gained 0.1% in

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August, cementing bets for aggressive rate hikes.

“Gold could potentially stabilize and right now, the markets

are still kind of digesting that inflation report, but it seems

that $1,700 level is holding- that’s key for gold,” said Edward

Moya, senior analyst with OANDA.

The dollar fell 0.3%, making greenback-priced bullion

less expensive for overseas buyers.

Markets are now pricing in a rate hike of at least 75 basis

points by the Fed at its Sept. 20-21 policy meeting.

Gold is considered a hedge against inflation, but higher

rates to tame rising price pressures dim appetite for the asset

since it bears no interest.

“After the FOMC meeting, (the Fed) might also lead markets

to believe they could still remain that aggressive… that’s

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lights out for gold. (If) $1,700 breaks, then we’re looking at

not much technical support… that’s the day where you might see

gold fall $50 or even more,” Moya added.

Spot silver rose 1.4% to $19.58 per ounce, platinum

gained 3.2% to $906.36, and palladium added 1.1%

to $2,126.51.

“We expect continued outflows from money managers and ETF

holdings to weigh on prices, which will ultimately raise the

pressure on a small number of family offices and proprietary

trading shops to capitulate on their complacent length in gold,”

TD Securities wrote in a note.

(Reporting by Kavya Guduru in Bengaluru; Editing by Krishna

Chandra Eluri)


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