Gold Steadies Following US Rate Hike Selloff

Gold Steadies Following US Rate Hike Selloff

However, an unexpected month-on-month drop in U.S. consumer prices and retail sales shown in data released on Wednesday suggested inflation pressures are moderating, which could have an impact on further interest rate hikes this year. A stronger dollar makes gold more expensive for holders of foreign currency while a rise in USA rates, lift the opportunity cost of holding non-yielding assets such as bullion.

The losses in gold were limited, however, with bullion underpinned by a myriad of global uncertainties, including a report that US President Donald Trump was under investigation. The dollar index firmed after data showed the number of Americans filing for unemployment benefits fell more than expected last week.

Gold crept up early on Wednesday as the market waited for the end of a two-day U.S. Federal Reserve meeting, with the central bank expected to hike interest rates and give indications on its monetary policy for the rest of the year.

The chances of Britain ending up outside the single market when Brexit talks are concluded have receded somewhat after last week's election, although the pound might weaken further against other currencies, a Reuters poll of economists found.

U.S. gold futures for August delivery were almost flat at US$1,268.90 an ounce. "But there's still enough for people to worry about in geopolitics at different levels", Mr Dahdah said.

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Gold is sensitive to moves higher in both US rates and the dollar. The U.S. dollar rose to 0.9748 Swiss franc from 0.9719 Swiss franc, and it was up to 1.3275 Canadian dollars from 1.3258 Canadian dollars.

Gold got some support from safe haven buying after the Washington Post reported that Mr Trump was being investigated by special counsel Robert Mueller for possible obstruction of justice.

As long as uneasiness around the Trump government among speculators and investors exists, gold will hold up pretty well, said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.

"With geopolitical risk having receded over the last week, gold is now trading on fundamentals and will be. subject to the nuances of U.S. dollar weakness or strength", said Jeffrey Halley, senior market analyst at OANDA. Palladium fell 1 percent to $853.99 per ounce, while platinum was down 0.8 percent at $928.50 per ounce. Among other precious metals, spot silver was headed for its biggest weekly decline in six weeks and was flat on the day at $16.71 per ounce.

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