Gold steady as Fed officials adopt dovish policy tone

Oct 11 – Gold prices held near a more than one-week high on Wednesday as the dollar edged lower after several U.S. Federal Reserve officials suggested that the recent surge in Treasury yields might make further rate hikes less necessary.

Spot gold  was trading at USD 1,859.43 per ounce as of 0529 GMT after hitting its highest level since Sept. 29 on Tuesday. US gold futures held their ground at USD 1,872.80.

The dollar dipped to nearly a two-week trough against a basket of currencies, tracking a slide in US Treasury yields that have retreated from their 2007 highs scaled last week.

“The clear debate among Fed officials is for how long this terminal level of Fed funds rate is to be maintained before the first interest rate cut comes into play,” said Kelvin Wong, senior market analyst for Asia Pacific at OANDA.

Minneapolis Fed President Neel Kashkari on Tuesday said it is “possible” that the recent rise in longer-term Treasury yields means the U.S. central bank need not raise interest rates as much as otherwise, while Atlanta Fed President Raphael Bostic sees no more rate hikes.

Higher rates raise the opportunity cost of holding gold, which is priced in dollars and does not yield any interest.

Gold prices rebounded from recent seven-month lows as Mid-East tensions fuelled safe-haven demand for bullion, but its next move depends on this week’s U.S. inflation data, pivotal to determining the Fed’s upcoming rate trajectory.

“The attention now has been shifted to the upcoming key U.S. CPI data that is due tomorrow even though the geopolitical risk premium factor is still lingering around in the background,” Wong added.

Fed’s September meeting minutes due later in the day would also be scanned for rate cues.

Elsewhere, spot silver rose 0.2% to USD 21.85 per ounce, platinum gained 0.6% to USD 885.93 and palladium added 0.5% at USD 1,175.13.

(Reporting by Swati Verma and Anjana Anil in Bengaluru; Editing by Subhranshu Sahu, Rashmi Aich and Sohini Goswami)