Gold rises on dollar pullback, hopes of slower rate hikes

(Reuters) - Gold prices rose 1% on Tuesday, helped by a retreat in the dollar and hopes for less aggressive rate hikes from the U.S. Federal Reserve going forward.

FILE PHOTO: Gold bars are pictured on display at Korea Gold Exchange in Seoul, South Korea, August 6, 2020. REUTERS/Kim Hong-Ji/File Photo

Spot gold gained 0.6% to $1,751.21 per ounce by 2:02 p.m. ET (1902 GMT) and U.S. gold futures settled 0.5% higher at $1,748.4.

The dollar was steady, while benchmark 10-year yields were off their highs for the day. [USD/][US/]

With the bulk of rate hikes from the Fed being priced in, investors are now seeing light at the end of the tunnel in terms of an end to the hikes, said David Meger, director of metals trading at High Ridge Future.

The U.S. central bank delivered a fourth consecutive 75-basis-point rate hike earlier this month to tame soaring inflation.

Fed funds futures have now priced in a 63.5% chance of a 50-basis-point hike at a policy meeting this month, and an 88% chance of another such rate hike in February.

Investor focus will be on Fed Chair Jerome Powell’s speech at a Brookings Institution event on Wednesday that could offer more clarity on the central bank’s policy stance.

Gold is sensitive to rising interest rates as they increase the opportunity cost of holding the non-yielding asset.

“A potential recovery in the dollar and still-rising interest rates around the world means investors might shy away from low- and zero-yielding assets like gold,” Fawad Razaqzada, market analyst at City Index, said in a note.

Traders also kept a close tab on unrest in top bullion consumer China as police were out in force in Beijing and Shanghai to prevent more protests against COVID-19 curbs.

Elsewhere, spot silver rose 1.9% to $21.31 per ounce, platinum gained 1.5% to $1,003.50, while palladium fell 0.3% to $1,838.91.

Reporting by Seher Dareen and Brijesh Patel in Bengaluru; Editing by Shailesh Kuber and Krishna Chandra Eluri