Gold hits one-week low as US Fed signals increase in interest rate

Spot gold XAU= fell 0.3% to $1,804.60 an ounce by 1038 GMT, having touched its lowest since Dec. 29 at $1,792.30. U.S. gold futures GCv1 dropped 1.5% to $1,797.70.

By Seher Dareen

(Reuters) - Gold prices slid to one-week low on Thursday as minutes of the U.S. Federal Reserve's December meeting signalled quicker increases to interest rates, boosting the dollar and Treasury yields.

Spot gold fell 0.3% to $1,804.60 an ounce by 1038 GMT, having touched its lowest since Dec. 29 at $1,792.30. U.S. gold futures dropped 1.5% to $1,797.70.

The "very hawkish" Fed minutes sent the dollar and the yields significantly higher, which has not helped gold, said independent analyst Ross Norman.

The U.S. dollar resumed its climb towards a recent 14-month high while benchmark U.S. 10-year Treasury yields rose to their strongest since April 2021. [US/] [USD/]

The Fed minutes released on Wednesday showed that officials had discussed shrinking the U.S. central bank's overall asset holdings as well as raising interest rates sooner than expected to fight inflation, with an 80% chance of a quarter of a percentage point increase plausible in March.

Some investors view gold as a hedge against higher inflation, but the metal is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.

"Where the precious metal closes the week is likely to be heavily influenced by the key U.S. jobs data on Friday," FXTM analyst Lukman Otunuga said in a note.

"A strong report could cripple gold bugs, opening a path lower towards $1,786 and $1,770. Should $1,800 prove to be reliable support, prices may rebound back towards $1,810 and $1,831."

In other metals, spot silver dropped 1.7% to $22.39 an ounce after dropping to $22.12, its lowest since Dec. 16.

Platinum fell 0.9% to $974.13 and palladium rose 0.9% to $1,880.94.

 

(Reporting by Seher Dareen in Bengaluru; Editing by David Goodman)