Gold gains as US Fed minutes pressure dollar

Oct 12 (Reuters) – Gold prices firmed on Wednesday, drawing support from a drop in the dollar and US Treasury yields in the wake of minutes from the Federal Reserve’s last policy meeting.

Spot gold rose 0.5% to USD 1,673.59 per ounce by 2:40 p.m. ET (1840 GMT). US gold futures settled down 0.5% at USD 1,677.50.

Fed policymakers agreed they needed to move to a more restrictive policy stance, and then maintain that for some time, to meet the US central bank’s goal of lowering inflation, a readout of last month’s two-day meeting showed on Wednesday.

That said, several participants in the discussion said it would be important to “calibrate” the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.

“The market is grasping for any sign of dovishness and are looking at the word ‘calibrate’, hence the dip in the US dollar and pop in gold,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York, adding that the minutes should, however, still be read as hawkish.

The dollar weakened, making gold less expensive for other currency holders. Benchmark US 10-year Treasury yields also eased.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

US consumer price index data is due on Thursday, which is expected to remain stubbornly elevated.

“Gold and silver look set to benefit from the eventual turnaround in the dollar and yields, hence the continued focus on inflation and economic data for sign of any weakness to support a shift in the hawkish stance being signalled by the Federal Reserve,” Ole Hansen, head of commodity strategy at Saxo bank, said in a note.

Spot silver XAG= fell 0.8% to USD 19.03 per ounce, platinum firmed 0.2% to USD 886.94, and palladium edged 0.2% higher to USD 2,144.68.

(Reporting by Bharat Govind Gautam and Brijesh Patel in Bengaluru; Editing by Maju Samuel and Shounak Dasgupta)