Gold rises past $1,750 as Fed members tout slower rate hikes

By Ambar Warrick

Investing.com-- Gold prices rose past key levels on Thursday, benefiting from a weaker dollar as the minutes of the Federal Reserve’s latest meeting showed that a growing number of members supported a slower pace of interest rate hikes.

The minutes, released on Wednesday, showed that the Fed was becoming increasingly concerned over the impact of its recent monetary policy tightening on the economy and inflation. The central bank hiked its benchmark rate by 375 basis points (bps) this year, with four consecutive hikes of 75 bps.

But markets are now pricing in a nearly 80% chance that the central bank will raise rates by a relatively smaller 50 bps in December.

Spot gold rose 0.2% to $1,753.40 an ounce, while gold futures rose 0.2% to $1,753.50 an ounce by 19:05 ET (00:05 GMT). Both instruments jumped about 0.6% after the release of the minutes on Wednesday, while the dollar sank 1%.

Fed members still remain uncertain over the level at which U.S. interest rates will peak during this hiking cycle, given that inflation is still trending well above the central bank’s 2% annual target.

Markets will look to November’s CPI inflation readings, due next month, to gauge whether inflation is steadily retreating in the country. But strength in consumer spending and the labor market suggest that inflation may be sticker than expected in the coming months.

Still, the prospect of smaller rate hikes by the Fed is positive for metal markets, given that sharp rises in interest rates this year greatly pushed up the opportunity cost of holding non-yielding assets.

Platinum futures rose 0.2%, while silver futures rallied 1.2%.

Gains in industrial metals were relatively subdued, as the space grapples with slowing demand in major importer China.

Copper futures fell 0.1% on Thursday after rising 0.5% in the prior session.

While weakness in the dollar supported prices of the red metal, concerns over China’s worst COVID-19 outbreak yet sapped broader appetite for copper. The country introduced new restrictions in several major cities this month, as it faces a record-high rise in daily infections.

Headwinds from Chinese demand have largely offset signs of tightening copper supply this year.