Gold trims losses after U.S. Fed minutes; firmer dollar weighs

(Reuters) - Gold pared some losses on Wednesday after minutes from a Federal Reserve meeting showed the pace of future hikes would depend on incoming economic data, while the dollar also added pressure on prices.

FILE PHOTO: One kilo gold bars are pictured at the plant of gold and silver refiner and bar manufacturer Argor-Heraeus in Mendrisio, Switzerland, July 13, 2022. REUTERS/Denis Balibouse/File Photo

Spot gold fell 0.5% to $1,766.29 per ounce by 2:36 p.m. ET (1936 GMT). U.S. gold futures settled down 0.7% to $1,776.7.

Minutes from the July Federal Open Market Committee (FOMC)meeting stated that it could take longer than anticipated for inflation to dissipate.

The pace of future hikes would depend, the minutes said, on incoming economic data, as well as Fed assessments of how the economy was adapting to the higher rates already approved.

“The gold market viewed the Fed minutes with a dovish tilt and prices edged higher,” Standard Chartered analyst Suki Cooper said.

Gold pared losses after the minutes were in, yet stayed lower, having been down for most of the day on a firmer dollar. [USD/]

“We expect the Fed to hike by 50 bps in September and focus will shift to the August CPI data and September non-farm payrolls data to determine whether inflation is indeed slowing and labour markets softening,” Cooper added.

Even though gold is seen as a hedge against inflation, rate hikes raise the opportunity cost of holding zero-yield bullion.

“We still see a Fed that is committed to fighting the inflationary pressures with upcoming rate hikes. However, it is the pace of those upcoming rate hikes that is potentially in question,” said David Meger, director of metals trading at High Ridge Futures.

Recent hawkish remarks from Fed officials have weighed on non-interest bearing bullion, and Fed funds future traders priced in a 57.5% chance of a 50-bps hike in September after the release.

Spot silver fell 1.3% to $19.86 per ounce, platinum was down nearly 1% to $925.89, while palladium fell 0.77 % to $2,137.71.

Reporting by Ashitha Shivaprasad, Seher Dareen and Kavya Guduru in Bengaluru; Editing by Devika Syamnath and Shailesh Kuber