January 31, 2018 / 10:44 AM / 8 months ago

PRECIOUS-Gold edges lower after Fed says it sees signs of inflation

    * Gold up 2.6 pct in Jan; biggest monthly gain since Aug
    * Platinum heads for biggest monthly gain since Jan 2017
    * Palladium hits 5-week low, heads for 3.3 pct monthly loss

 (New throughout, updates prices, market activity and comments
after Fed statement)
    By Renita D. Young and Eric Onstad
    NEW YORK/LONDON, Jan 31 (Reuters) - Gold prices were flat on
Wednesday, but dipped slightly after the U.S. Federal Reserve
said it would keep interest rates the same, but expected
inflation to rise this year.
    On Fed Chair Janet Yellen's last policy meeting as head of
the central bank, the Fed left interest rates unchanged. But its
message on inflation signaled it was on track to raise borrowing
costs in March under incoming chief Jerome Powell.             
    Inflation worries generally boost gold, which is seen as a
safe haven against rising prices. But expectations that the Fed
will raise interest rates to fight inflation make gold less
attractive because it does not pay interest.
    "Inflation on a 12-month basis is expected to move up this
year and to stabilize" around the U.S. central bank's 2 percent
target over the medium term, the Fed said in a statement
following the two-day meeting.
    Spot gold        edged down 0.07 percent at $1,337.20 by
2:41 p.m. EST (1941 GMT), hitting a one-week low, while U.S.
gold futures         for February delivery settled up $3.60, or
0.3 percent, at $1,339. 
    The U.S. dollar turned positive after the Fed statement. A
stronger dollar pressures commodities priced in the currency,
making them more expensive for buyers using other currencies.
              
    But, "as expected, even though they said the near-term risk
to economic outlook looked balanced, they’re clearly setting he
stage for a March rate increase and trying to send a message to
the market to expect three or so (rate hikes) in 2018," said
Trey Reik, senior portfolio manager at Sprott Asset Management
USA.
    "Their confidence comes from the fact that there are signs
that we're having this synchronized growth acceleration."
    Gold prices, which have been boosted by a weaker dollar,
headed for a third consecutive monthly gain in January, up 2.6
percent, the biggest monthly increase since August 2017.  
    In other precious metals, silver        climbed 0.4 percent
at $17.20 an ounce after hitting a one-week low of $17.03. 
    Palladium        shed 2.7 percent at $1,026 an ounce,
hitting a fresh five-week low after a 55 percent gain in 2017.
Despite rocketing earlier in January up to the highest since
records dating back to 1990, spot palladium was on track to
close the month down 3.3 percent, its weakest monthly
performance since December 2016.
    Platinum        dipped 0.1 percent at $995.20 per ounce. It
is up about 8 percent for the month. It hit a one-week low in
the previous session.

 (Additional reporting by Marcy Nicholson in New York, Nithin
Prasad and Nallur Sethuraman in Bengaluru; Editing by Alison
Williams and David Gregorio)
  
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