August 16, 2017 / 7:48 PM / 4 months ago

PRECIOUS-Gold firms as dollar dips after Fed minutes; palladium hits over 16-yr high

 (Recasts; adds Fed minutes, palladium price move, comments;
changes dateline, previous LONDON)
    * Fed policymakers grow more worried about weak inflation
-minutes
    * Gold firms, palladium hits more than 16-year high
    * Trump says disbanding two CEO advisory panels

    By Devika  Krishna Kumar
    NEW YORK, Aug 16 (Reuters) - Gold rose about 1 percent on
Wednesday, shaking off two days of losses, as the dollar edged
lower after the release of the minutes from Federal Reserve's
July meeting at which policymakers voted unanimously to keep
U.S. interest rates unchanged.
    Fed policymakers appeared increasingly wary about recent
weak inflation data and some called for a halt to further rate
hikes until it was clear the trend was transitory, according to
the minutes of the central bank's last policy meeting.
            
    Spot gold        was up 0.8 percent to $1,281.15 per ounce
by 2:49 p.m. EDT (1849 GMT), after rising as much as 1 percent
to a session high of $1,283.90.
    U.S. gold futures         for December delivery rose 0.3
percent to settle at $1,282.90 an ounce.
    Palladium        jumped 3.4 percent to a high of $916, its
highest since February 2001.
    Palladium was helped by a bullish fundamental outlook and
broad-based buying across precious metals market due to
geopolitical jitters and dovish statements from the Fed, said
Bill O'Neill, partner with Logic Advisors in Saddle River, New
Jersey.
    "Demand for palladium has been strong. The newest cars in
places like India and China are driving that. A lot of these
markets are about psychology and emotion, like gold. But
palladium has strong industrial fundamentals," he said.
    The auto industry is by far the largest consumer of the
metal.
    The dollar        weakened against a basket of currencies
after the release of the Fed's meeting minutes.       
    Earlier in the session, the dollar had maintained its strong
stance, seeming to shrug off data on Wednesday showing U.S.
housing starts and permits were down sharply in July.
            
    Higher interest rates could boost the dollar, making
commodities priced in the greenback more expensive for holders
of other currencies.
    Analysts largely viewed the latest commentary from the Fed
as constructive for gold as previously priced in rate hikes are
now somewhat in doubt. However, the possibility of a December
rate hike may still be a possibility.
    "The minutes of the July meeting indicate that many
participants still view the recent weakness in consumer prices
as transitory, and that most expect inflation to rebound in the
coming years," said Royce Mendes, director and senior economist
at CIBC Capital Markets in Toronto.
    "Given the still limited concerns surrounding the undershoot
of inflation, a few months of healthy price increases over the
back half of this year will keep a December rate hike alive."
    U.S. Treasury yields, meanwhile, fell to session lows
mid-afternoon on Wednesday as U.S. President Donald Trump's
disbanding of two CEO advisory panels led Wall Street stocks to
pare their earlier gains and increased bids for government debt.
     
    Gold had rallied after a war of words between Trump and
North Korea about Pyongyang's development of nuclear missiles.
But in an example of how tensions has subsided in recent days,
Trump praised North Korean leader Kim Jong Un on Wednesday for a
"wise" decision not to fire missiles toward the U.S. territory
of Guam.             
    "So far we have not seen any positive changes in worries
with Russia, North Korea, Venezuela and more political headlines
may be coming to support gold prices," said George Gero,
managing director at RBC Wealth Management.
    Among other precious metals, silver        added 2.8 percent
at $17.06 per ounce and platinum        rose 2.1 percent to
$976.60 per ounce.

 (Additional reporting by Chris Prentice in New York, Eric
Onstad in London, Apeksha Nair and Arpan Varghese in Bengaluru;
editing by Adrian Croft and G Crosse)
  

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