Gold gains on softer dollar with focus on Fed meeting

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Gold prices rose on Tuesday on the back

of a weaker dollar, but were stuck in a tight range as investors

refrained from taking big bets ahead a possible aggressive U.S.

interest rate hike.

Spot gold was up 0.3% at $1,724.45 per ounce, as of

0311 GMT. U.S. gold futures gained 0.3% to $1,723.60 per

ounce.

The dollar slipped for a fourth straight session,

down 0.2% against its rivals, making gold less expensive for

buyers holding other currencies.

“We’re not really seeing a tremendous amount of directional

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conviction here. It seems like the market is most importantly

waiting for the Fed announcement,” said Ilya Spivak, a currency

strategist at DailyFX.

“However, markets over the past two weeks have been

consistent with gold picking up and the dollar pulling back,

suggesting they are kind of getting comfortable with where the

rates outlook they think is going.”

The U.S. Federal Reserve is widely expected to raise

interest rates by 75 basis points at the conclusion of its

policy meeting on Wednesday. A hike of that magnitude would

effectively close out pandemic-era support for the economy.

Expectations around a 100-bp rate hike surged after U.S.

annual consumer prices saw their sharpest spike in more than

four decades in June. However, traders dialed down those bets

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following recent weak economic readings.

Meanwhile, the European Central Bank may not be done with

big rate hikes after its initial half-point increase last week,

Latvian central bank governor Martins Kazaks said in an

interview with Bloomberg News.

Rising interest rates increase the opportunity cost of

holding non-yielding bullion.

Indicative of sentiment, holdings of SPDR Gold Trust ,

the world’s largest gold-backed exchange-traded fund, fell 0.06%

to 1,005.29 tonnes on Monday.

Elsewhere, spot silver rose 0.6% to $18.52 per ounce,

platinum gained 0.8% to $886 and palladium was

steady at $2,009.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu

Sahu)