Gold firms on dollar dip; spotlight on Fed policy decision

Dec 9 (Reuters) – Gold firmed just below the key USD 1,800 level on Friday as the dollar eased, with caution ahead of US inflation data and the Federal Reserve’s policy decision due next week limiting overall moves.

Spot gold was up 0.3% at USD 1,794.49 per ounce, as of 0648 GMT, but fell 0.2% this week. US gold futures rose 0.3% to USD 1,807.10.

The dollar index was down 0.2%. A weaker dollar makes gold more attractive to buyers holding other currencies.

There’s a real chance of an upward move in gold heading into next week’s Fed meet and CPI data, said Clifford Bennett, chief economist at ACY Securities.

Investors now expect a 93% chance of a 50-basis point rate hike at the Fed’s policy meeting on Dec. 13-14. The US Consumer Price Index (CPI) report for November is due on Dec. 13.

If the Fed slows the pace as per expectations, along with a relatively moderate CPI print, “then dollar might weaken and all of a sudden you could see a perfect storm rushing over gold’s horizon,” Bennett added.

Lower interest rates tend to be beneficial for bullion as they decrease the opportunity cost of holding the non-yielding asset.

Traders will care to see what the Fed has to say about the trend of inflation and where rates could peak, Edward Moya, senior analyst with OANDA, said in a note.

“Gold looks like it will find a home around the USD 1,800 level, until we have further indications.”

The number of Americans filing new claims for jobless benefits increased moderately last week, pointing to a still-tight and strong labor market despite growing fears of a recession.

Spot silver edged 0.3% higher to USD 23.15, platinum rose 0.7% to USD 1,010.30. Palladium lost 0.5% to USD 1,918.01, but was headed for second straight weekly gain.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich)