Gold prices edged up on Thursday as the dollar eased, although hawkish comments by U.S. Federal Reserve policymakers dented the metal’s appeal and kept it well below the key $1,800 mark.
Spot gold rose 0.3% to $1,792.93 per ounce by 0703 GMT, after slipping to its lowest since Nov. 4 on Wednesday. U.S. gold futures added 0.5% to $1,793.80.
Gold has slumped 4.5% from last week’s five-month high, with a growing number of Fed policymakers indicating they were open to raising interest rates quicker, as per minutes of the U.S. central bank’s last policy meeting.
“As markets price in some monetary policy normalization, that should weigh on gold in the short term. But major central banks are unlikely to aggressively hike rates given the fiscal burden of higher interest rates and large government debt accumulated” said Hitesh Jain, lead analyst at Mumbai-based Yes Securities.
This more-moderate monetary policy normalisation and the potential loss of momentum in economic growth next year as the base effects of the pandemic wear off, should support gold in 2022, Jain added.
Higher interest rates raise non-interest bearing gold’s opportunity cost.
Investors also took stock of a raft of U.S. data which included an upwards revision to third-quarter GDP, a fall in jobless claims to a 52-year low last week and a higher personal consumption expenditures price index reading.
Offering some support to bullion on Thursday, the dollar index eased off a 16-month high hit in the previous session, reducing the metal’s cost to buyers holding other currencies.
Ajay Kedia, director at Kedia Commodities in Mumbai, expects a further pullback in the dollar to support gold and said the metal has good technical support at $1,780.
Spot silver rose 0.5% to $23.65 per ounce. Platinum gained 1.9% to $993.31 and palladium was up 2.7% at $1,900.66.