Gold holds drop after Fed minutes signal slower rate-hike pace

Gold held a drop as investors weighed minutes from the Federal Reserve’s July meeting, which signaled ongoing interest-rate hikes but at a slower pace down the track.

Bullion is hovering near a two-week low after the US dollar and bond yields rose Wednesday, although some losses were pared in the wake of the release of the minutes. The transcript showed Fed officials saw the need to dial back the pace of rate increases at some point but also wanted to gauge how their monetary tightening was working toward curbing US inflation. They also saw the risks of tightening more than necessary.

Swaps tied to Fed policy meeting dates indicated lower odds of a 75-basis points hike next month as opposed to a half-point move. Higher rates weigh on non-interest bearing bullion.

Given the Fed minutes signal hikes could be deferred or smaller, that indicates “the market is going to have to get used to inflation numbers being much higher for longer,” Jake Klein, executive chairman at Australia’s Evolution Mining Ltd., told Bloomberg TV. “That’s good for gold,” he said, adding that prices could rally above $2 000 an ounce next year.

Meanwhile, some geopolitical risks have reared up again as the US and Taiwan will start formal talks on a trade and economic initiative, following through on a long-planned promise to deepen ties amid opposition from China, and underpinning haven demand for bullion.

Spot gold rose 0.1% to $1 763.45 an ounce as of 1:09 p.m. in Singapore, after dropping as much as 0.9% on Wednesday to $1 759.84, the lowest level since August 3. The Bloomberg Dollar Spot Index edged higher after climbing 0.3% in the previous session. Silver and platinum fell, while palladium was little changed.

Investor interest in gold has waned, with holdings in bullion-backed exchange-traded funds contracting for 11 out of the last 12 days, according to initial data compiled by Bloomberg.

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