Gold Prices Dip as Potential Rate Hikes Weigh

By / August 09, 2018 / / Article Link - Gold prices traded lower on Wednesday as a Federal Reserve policymaker reiterated the need for rate hikes and a stronger dollar weakened demand for the precious metal.

At 11:42 AM ET (15:42 GMT), gold futures for December delivery on the Comex division of the New York Mercantile Exchange slipped $1.10, or 0.09%, to $1,217.20 a troy ounce.

Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, inched 0.02% to 95.02.

A stronger greenback makes the dollar-denominated metal more expensive for holders of other foreign currencies, dampening demand from foreign investors.

In a session with no major economic reports, Richmond Fed president Thomas Barkin said that the U.S. central bank should follow through on gradually raising interest rates to more normal levels, given the current strength of the American economy.

“It is difficult to argue that lower than normal rates are appropriate when unemployment is low and inflation is effectively at the Fed’s target,” he said in a speech delivered Wednesday.

Barkin added that the underlying economy was strong and was supported by recent additional fiscal stimulus, reducing the risk of normalization.

The Fed is widely expected to raise rates for the third time this year to a range between 2% and 2.25% at its next meeting on September 25 and 26.

Higher interest rates tend to weigh on demand for gold, which doesn’t bear interest, in favor of yield-bearing assets.

Investors will pay close attention to inflation data this week, with producer prices out on Thursday and the consumer price index at the end of the week.

Headline inflation is forecast to inch up to 3.0% while core inflation is expected to hold at 2.3%, above the Fed’s 2% objective.

In other metals trading, silver futures edged forward 0.01% at $15.375 a troy ounce by 11:45 AM ET (15:45 GMT).

Palladium futures fell 1.22% to $891.90 an ounce, while sister metal platinum lost 0.36% at $828.40.

In base metals, copper dipped 0.04% to $2.751 a pound.