Gold firms on softer dollar; rate-hike bets cap gains

Oct 17 (Reuters) – Gold prices rose on Monday as the dollar retreated slightly, but impending supersized US interest rate hikes tempered further gains for the non-yielding bullion.

Spot gold rose 0.6% to USD 1,651.76 per ounce, as of 0703 GMT. Last week’s more than 3% decline was gold’s worst performance since July.

US gold futures were up 0.4% at USD 1,655.30.

The dollar index slipped 0.1%, reviving some of gold’s appeal for overseas buyers. Benchmark US 10-year Treasury yields also eased further from a 14-year peak scaled last week.

While the dollar’s still on a strong footing with the Federal Reserve likely to continue aggressive rate hikes, the “market is already reflecting these hawkish expectations and any softer data from the US. could see the USD stalling,” capping gold’s declines, said ANZ commodities strategist Soni Kumari.

US retail sales were unexpectedly flat in September, although the August reading was revised up 0.4%.

A survey from the University of Michigan on Friday showed consumer sentiment improved further in October, but inflation expectations deteriorated a bit, keeping bets for another 75-basis-point rate hike next month intact.

St. Louis Fed President James Bullard said the latest CPI data warrants continued “frontloading” through larger rate hikes of three-quarters of a percentage point but that does not necessarily mean rates need to be raised above the central bank’s projections.

Fed policymakers have raised rates sharply this year, sending gold down nearly 10% so far this year.

Reflecting sentiment, holdings of the SPDR Gold Trust GLD exchange-traded fund marked their biggest one-day outflow since Sept. 26 on Friday.

Gold prices may retest support at USD 1,641 per ounce, a break below which could open the way towards $1,614, according to Reuters technical analyst Wang Tao.

Spot silver climbed 1.3% to USD 18.50 per ounce, platinum rose 1.1% to USD 909.00 and palladium gained 1.4% to USD 2,017.22.

(Reporting by Eileen Soreng in Bengaluru; Editing by Sherry Jacob-Phillips, Rashmi Aich, and Uttaresh.V)