Gold inched lower on dollar uptick, traders bet on Fed pause

Reuters – Gold prices eased on Wednesday from a 1-1/2-month high touched in the previous session, dragged by a slightly stronger dollar, even as investors bet that the U.S. Federal Reserve would pause its rate-hike cycle after July.

Spot gold fell 0.1% to USD 1,977.63 per ounce by 0821 GMT after hitting its highest since May 24 at USD 1,984.19 on Tuesday.

US gold futures rose 0.1% to USD 1,981.70.

The dollar index was 0.2% higher after hitting a more than one-year low on Tuesday, making the greenback-priced gold more expensive for holders of other currencies.

While a 25 basis-point rate hike at the Fed’s July 26 meeting is largely expected, the U.S. central bank is “expected to retain its hawkish tone, which could pose a challenge to gold’s upside”, said Yeap Jun Rong, a market strategist at IG.

Economists polled by Reuters expect the likely July rate hike to be the Fed’s last increase in the current tightening cycle.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

“It could also boil down to which central bank, in the end, is more hawkish than the other,” Harshal Barot, a senior consultant at Metals Focus, said.

“We could see the euro start to outperform against the dollar if the Fed pauses but the European Central Bank continues hiking, which could then indirectly support gold.”

European stocks and government bonds rallied as good news on UK inflation added to a picture of cooling price pressures globally, although the data slammed the brakes on sterling’s recent winning streak. MKTS/GLOB

Investors will further keep an eye out for initial jobless claims data on Thursday for the week of July 15, forecast to rise to 242,000 from a seasonally adjusted 237,000.

Among other metals, spot silver fell 0.1% to USD 25.06 per ounce, platinum rose 0.1% to USD 983.21, while palladium was down 0.5% to USD 1,312.76.

(Reporting by Seher Dareen in Bengaluru; Editing by Sherry Jacob-Phillips, Subhranshu Sahu and Sohini Goswami)