Gold flat as bets for aggressive US Fed blunt appeal

Oct 18 (Reuters) – Gold steadied on Tuesday, giving up gains made earlier in the session on a softer dollar, as prospects of further large US Federal Reserve interest rate hikes continued to weigh.

Spot gold was nearly flat at USD 1,649.63 per ounce by 3:22 p.m. ET (1921 GMT). US gold futures settled down 0.5% to USD 1,655.8.

“In the end, the primary catalyst (for gold) will be the Fed’s rate hiking cycle,” said Edward Moya, senior analyst with OANDA.

Federal Reserve Bank of Minneapolis board members sought a full percentage point increase in a key emergency borrowing rate for commercial banks ahead of the US central bank’s September monetary policy meeting, minutes of discount rate meetings showed on Tuesday.

“You’re getting relief in yields (and) the dollar rally has definitely hit a major hurdle … gold, at the very least, has not seen selling pressure return, it’s somewhat stabilizing,” Moya said.

The dollar edged higher after hitting its lowest level since Oct. 6 earlier in the session, making greenback-priced bullion more expensive for overseas buyers.

Expectations of a large Fed interest rate hike were cemented following a red-hot US consumer inflation print last week, with markets pricing in a 75-basis-point hike in November.

Rising interest rates and bond yields dim gold’s appeal as they increase the opportunity cost of holding the non-yielding asset.

Benchmark US 10-year Treasury yields eased on Tuesday, buoying gold.

“The main fixation of gold and silver traders remains the daily price direction of the US dollar index,” Jim Wyckoff, senior analyst at Kitco Metals, said in a note.

Spot silver was flat at USD 18.6863 per ounce and platinum fell 0.7% to USD 904.03, while palladium gained 0.6% to USD 2,011.94.

Platinum “continues to benefit from a robust recovery in automotive demand across the globe, with the European Union’s new vehicle registrations rising 9.6% year-over-year,” TD Securities said in a note.

(Reporting by Kavya Guduru and Seher Dareen in Bengaluru; Editing by Maju Samuel, Alexandra Hudson and Shounak Dasgupta)