Gold slipped Wednesday after Federal Reserve minutes showed most policymakers favor one more rate hike this year, while the dollar firmed and oil settled higher in a volatile session. Central bank buying kept providing some underlying support to bullion even as the rate outlook weighed on prices.
Spot gold dipped 1.3% to settle at $4,110.91 an ounce. Gold futures inched down 0.1% to settle at $4,136.85 an ounce. Traders focused on the Fed's September meeting minutes, released Wednesday, which showed most Federal Open Market Committee participants saw another interest rate hike by the end of this year.
Fed minutes show hawkish unity
The Federal Open Market Committee unanimously raised the federal funds rate by 25 basis points last month, marking the first rate hike in over three years. According to the minutes: "another increase in the target range for the federal funds rate would likely be appropriate". Fed Chair Kevin Warsh had said after the decision that getting inflation back to the central bank's 2% target remained a significant challenge.
Higher rates tend to weigh on non-yielding assets such as gold, and they also tend to strengthen the dollar, making bullion costlier for foreign buyers. The U.S. dollar index climbed 0.4% on Wednesday. But odds of a further hike this month have fallen sharply since September, and the CME FedWatch tool put the probability of the Fed holding rates steady at nearly 83%, down from about 54% a month ago.
Despite the rate volatility, persistent central bank purchasing has continued to provide some support to gold. Analysts at ING noted that World Gold Council data showed central banks added 39 tonnes in August, pushing year-to-date purchases to 170 tonnes.
Oil settles higher in volatile trading
Gold also faced pressure as oil mostly rose. Brent crude futures settled 0.6% higher at $101.17 a barrel after supply concerns ticked up amid rising attacks on ships in the Strait of Hormuz and fighting between Iran-backed Houthis and the Saudi-backed Yemeni government.
The advance eased, however, after the International Energy Agency agreed to speed up the release of oil stocks and prioritize diesel to combat high prices. France said it would release 10 million barrels of diesel from emergency stocks. The IEA said completing a previously announced release of 400 million barrels as soon as possible would bring about 100 million barrels to market.
Source: Investing.com
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