Gold prices ease as dollar, yields firm ahead of Fed minutes

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Gold prices dipped on Wednesday after

the dollar and Treasury yields jumped to multi-year highs on

hawkish comments from U.S. Federal Reserve officials and as

cautious traders braced for the U.S. central bank’s minutes from

its latest meeting.

Spot gold was down 0.3% at $1,918.74 per ounce, as of

0612 GMT. U.S. gold futures were down 0.2% at $1,923.10.

“Stronger U.S. dollar and lack of safe-haven demand are

capping its (gold’s) upside potential … (U.S. dollar) has

certainly taken the shine from gold as each rally from the

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$1,916 support fails to hold on to any gains,” said City Index

senior market analyst Matt Simpson.

“Price action remains choppy overall and hesitant to commit

to a particular direction.”

The dollar scaled its highest in nearly two years as Fed

officials pushed for a quick reduction in the central bank’s

bloated balance sheet, with one of them expressing openness to

hefty rate increases of half a percentage point.

A stronger dollar makes gold less attractive for other

currency holders.

“Hawkish comments from key Fed members yesterday likely

overshadow today’s FOMC (Federal Open Market Committee) minutes,

as they point towards a 50 bp hike at the next FOMC meeting and

a faster balance sheet reduction than anticipated,” Simpson

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said.

Minutes from last month’s Fed meeting, due at 1800 GMT, may

add detail to policymakers’ thinking about how quickly they

could move to reduce bondholdings and lift interest rates. The

Fed’s stance has been sounding ever more hawkish.

U.S. Treasury yields hit multi-year highs, with longer-term

yields moving more quickly and partly reversing some of the

recent inversions in the U.S. curve.

Gold is highly sensitive to rising U.S. interest rates and

higher yields, which increase the opportunity cost of holding

non-yielding bullion, while boosting the dollar, in which it is

priced.

Spot silver shed 0.3% at $24.25 per ounce, platinum

fell 0.4% to $964.19 and palladium was up 0.2% at

$2,242.04.

(Reporting by Asha Sistla in Bengaluru; Editing by Sherry

Jacob-Phillips)