Gold Gains After Fed Minutes Show Split on Rate-Hike Timing

ANCHORAGE San Francisco Federal Reserve Bank President John Williams on Thursday joined a growing chorus of his colleagues signaling support for a US interest rate hike in coming months, saying that waiting too long could be costly for the economy.

“In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later”, San Francisco Fed President John Williams said on Thursday. Australian shares closed 0.3 per cent higher, recording a 0.1 per cent decline for the week.

It had fallen to the lowest level since June 24 overnight in response to the Fed’s July meeting minutes this week saying more data are needed before interest rates can rise.

Brent rallied above $50 a barrel for the first time since July.

“Market expectations for a rate hike in September are still low, and this committee tends to be cautious”, said Sara Johnson and Ozlem Yaylaci, economists at IHS Markit.

Gold is sensitive to higher rates which lift the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar in which it is priced.

Currency analysts at Brown Brothers Harriman noted that the US dollar has sold off in the wake of the FOMC minutes, which is positive for gold prices, because markets were expecting a much stronger hawkish slant. Analysts have noted that $1,365.00 is the upper end of that range. “The money going into the ETFs (exchange-traded funds) looks to be slowing down a bit and it feels that the market has been feeling a bit heavy on the longs”, said a Sydney-based precious metals trader.

China’s CSI 300 index .CSI300 and the Shanghai Composite .SSEC slid about 0.4 percent, but were still up 1.7 percent and 1.4 percent for the week, respectively, on hopes the government will roll out more stimulus to meet economic growth targets.

The net-long position in gold futures and options fell 4.3 percent to 255,773 contracts in the week ended August 9, according to Commodity Futures Trading Commission data released three days later.

The dollar index, which measures the greenback against six major peers, was down 0.59 per cent at 94.159 in late trading, the lowest level in seven weeks.

“I think every one of our meetings should be in play in principle”. The metal remains 0.9 percent higher this week.

USA gold dropped 0.68 percent to $1,347.80 an ounce.

West Texas Intermediate, the US benchmark, added 2.9% to $48.16 a barrel on Thursday.