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PRECIOUS-Gold up after Fed minutes suggest little change in U.S. rate outlook
May 24, 2017 / 7:22 PM / 7 months ago

PRECIOUS-Gold up after Fed minutes suggest little change in U.S. rate outlook

    * Fed ties rate hike to rebound, sees balance sheet cuts in
2017
    * Fed fund futures still imply high chance of rate hike in
June
    * GRAPHIC-2017 asset returns: tmsnrt.rs/2jvdmXl

 (Updates prices, adds comments, background, NEW YORK dateline)
    By Devika  Krishna Kumar and Jan Harvey
    NEW YORK/LONDON, May 24 (Reuters) - Gold prices rose on
Wednesday as the dollar slipped and minutes of the Federal
Reserve's last policy meeting suggested the U.S. central bank
was cautious about raising interest rates.
    The metal is highly sensitive to higher rates, which
increase the opportunity cost of holding non-yielding bullion
while boosting the dollar, in which it is priced. 
    Spot gold        traded at $1,256.02 an ounce by 2:50 p.m.
EDT (1850 GMT), up 0.42 percent from Tuesday, when it slipped
0.7 percent after two days of gains.  
    Minutes of the Federal Open Market Committee's early May
meeting showed policymakers agreed to not tighten credit until
they saw evidence that a recent economic slowdown was
transitory.             
    Federal Funds Futures imply traders see an 83 percent chance
of a U.S. rate hike in June, and a 46 percent chance of two more
hikes by the year-end.             
    "Gold is largely unchanged after an initial burst higher
failed as May's Fed minutes offered little to suggest that the
Committee was seriously reconsidering a widely anticipated June
rate hike," said Tai Wong, director of base and precious metals
trading for BMO Capital Markets in New York.
    "Yields are lower though, as there was no indication that a
balance sheet reduction was imminent which may support gold
around today's lows."
    Expectations for higher U.S. interest rates next month and
possibly later in 2017 have been a major factor in keeping gold
prices pinned below chart resistance at $1,300 an ounce this
year.
    Gold has risen about 3 percent since hitting a near-two
month low of $1,213.81 on May 9. The gain was driven chiefly by
U.S. political turmoil after President Donald Trump fired
Federal Bureau of Investigation Director James Comey, triggering
a stock sell-off and pressuring the dollar.    
    "We think that gold is slowly regaining interest, but
hesitation lingers in terms of putting on more meaningful
strategic positions for now," UBS Strategist Joni Teves said in
a note. 
    "Market participants are looking for more significant
catalysts in order to strengthen their conviction and many still
struggle to jump into gold in an environment where the Fed is
hiking rates."
    U.S. stocks were volatile but still slightly higher on
Wednesday. World stock markets eased earlier on Wednesday after
China's sovereign credit rating was downgraded. The dollar was
down about 0.2 percent against a currency basket       .
                       
    U.S. gold futures        for June delivery settled 0.2
percent lower at $1,253.1 an ounce.
    Among other precious metals, silver        was up 0.8
percent at $17.16 an ounce, while platinum        was 0.8
percent higher at $947.30 an ounce. Both hit their highest since
late April in the previous session.
    Palladium        was down 1.04 percent at $762.5 an ounce.

    
 (Additional reporting by Vijaykumar Vedala in Bengaluru;
Editing by Ed Osmond and Richard Chang)
  

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