Gold gains on softer dollar as Fed signals slowdown in rate hikes

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Gold prices rose to a near one-week high on Thursday on a weaker dollar, after minutes from the U.S. Federal Reserve’s November meeting signaled it may soon slow the pace of interest rate hikes.

Spot gold rose 0.3% to $1,754.13 per ounce by 2:05 p.m. ET (1905 GMT), while U.S. gold futures were up 0.5% to $1,754.30.

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The minutes of the Fed’s Nov. 1-2 policy meeting released on Wednesday showed a “substantial majority” of Fed policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes.

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The dollar index was 0.2% lower, making bullion less expensive for overseas buyers.

“Investor expectations are moving on a dovish path for the Federal Reserve,” Carlo Alberto De Casa, external analyst for Kinesis Money, said, adding a weaker U.S. dollar was also a positive catalyst for bullion.

High interest rates have kept a leash on gold’s traditional status as a hedge against inflation and other uncertainties this year, as they translate into a higher opportunity cost to hold the non-yielding asset.

The U.S. central bank delivered a fourth consecutive 75 basis-point (bps) rate hike earlier this month, and market participants now widely expect a 50 bps rate increase at the December meeting.

Rising real rates until early 2023 remained a challenging backdrop for non-yielding gold, ANZ analysts said in a note.

But intensifying recessionary and geopolitical risks into 2023, robust emerging markets’ physical demand and record high purchases by central banks suggest gold can still outperform against real rates, ANZ added.

Spot silver fell 0.3% to $21.45 per ounce, platinum dipped 0.9% to $987.78 while palladium was little changed at $1,881.72.

Market activity was likely to be muted by the U.S. Thanksgiving holiday. (Reporting by Kavya Guduru in Bengaluru, additional reporting by Seher Dareen; Editing by Maju Samuel, Mark Potter and Jonathan Oatis)

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