Gold ticks lower on firmer dollar after Fed cranks up rates

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Gold prices inched lower on Thursday, as

the dollar recovered slightly after a large but widely expected

interest rate hike by the U.S. central bank sent the currency

tumbling in the previous session.

Spot gold fell 0.1% to $1,831.63 per ounce, as of

0235 GMT, while U.S. gold futures rose 0.8% to $1,833.40.

The conflicting currents of support from potential

safe-haven demand and inflationary hedge buying versus pressure

from a higher interest rate regime are keeping gold prices

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balanced, said Michael McCarthy, chief strategy officer at Tiger

Brokers, Australia.

Higher short-term U.S. interest rates and bond yields

increase the opportunity cost of holding bullion, which yields

no interest.

The U.S. Federal Reserve on Wednesday approved a

75-basis-point interest rate hike, its largest in more than a

quarter of a century, to stem a surge in inflation, and flagged

a slowing economy.

“Gold has been remarkably range-bound for weeks now (despite

major news)… and it’s a real head-scratcher for traders at the

moment to work out what exactly will drive gold out of this

range,” McCarthy said, adding the dollar’s overall upward trend

presented a cautious outlook for gold.

The Fed’s announcement drove longer-dated U.S. government

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bond yields lower and nudged the dollar off two-decade highs,

which took gold as much as 1.9% higher in the previous session.

Meanwhile, Asian stocks rose on Thursday, carrying momentum

from a global equities rally overnight.

However, key investors with big positions in gold know that

the economic outlook is still challenging and still prefer to

hold bullion as a safe-haven asset, said Brian Lan, managing

director at dealer GoldSilver Central.

Spot silver firmed 0.1% to $21.67 per ounce, platinum

gained 0.2% to $940.98, and palladium rose 0.5% to

$1,870.79.

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by

Shailesh Kuber and Subhranshu Sahu)