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Gold rises as Fed slowdown hopes offset firm yields, dollar

(Reuters) - Gold prices rose on Friday despite an uptick in the dollar and U.S. bond yields as some investors still expect the Federal Reserve will slow the pace of rate hikes from early next year.

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 rose 0.5% to $1,798.40 per ounce, as of 1907 GMT. U.S. gold futures settled 0.5% higher at $1,810.70.

“The market seems to be focused on a light at the end of the tunnel, a point at which the Fed is done raising interest rates and based on that we’ve seen general support in gold,” said David Meger, director of metals trading at High Ridge Future.

A 50-basis-point rate hike is widely expected to be delivered by the Fed at its final meeting of 2022 scheduled on Dec. 13-14.

Rate hikes to fight soaring inflation raise the opportunity cost of holding zero-yield bullion.

How long this positive sentiment towards gold lasts will be dependent on how much the U.S. central bank increases its benchmark rate by and the rhetoric of Fed Chair Jerome Powell at the post-meeting press conference, Kinesis Money analyst Rupert Rowling said in a note.

However, data showed U.S. producer prices rose more than expected in November, adding to market uncertainty over the Fed policy outlook.

Following the data, the dollar edged up, making gold more expensive for overseas buyers, while yields on 10-year Treasury notes also gained. [USD/] [US/]

Focus now shifts to the U.S. Consumer Price Index data due on Dec. 13.

“If CPI runs hot, you might see a strong case for the Fed to deliver back-to-back half point rate increases before they pause, which might suggest gold might give back some of the gains its made over the past month,” Edward Moya, senior analyst with OANDA, said in a note.

Elsewhere, spot silver rose 1.8% to $23.48 per ounce, platinum climbed 2.1% to $1,024.00. Palladium gained 1.7% to $1,958.79.

Reporting by Kavya Guduru in Bengaluru; Editing by Maju Samuel and Susan Fenton

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