Gold jumps as dollar sinks on weak U.S. data, Fed minutes

By Renita D. Young and Peter Hobson

NEW YORK/LONDON (Reuters) - Gold prices rose on Wednesday as the dollar fell on technical factors and weak U.S. economic data, and gold jumped more after the U.S. Federal Reserve released minutes of its latest meeting, hinting at an interest rate increase in the near future.

Gold's gains accelerated after the Fed minutes, as the dollar fell to a two-month low versus the Japanese yen, a one-month low against the Swiss franc and its lowest since Oct. 20 against a basket of currencies.

Spot gold was up 1.1 percent at $1,293.92 ounce by 2:40 p.m. EST (1940 GMT). U.S. gold futures for December delivery settled up $10.50 an ounce, or 0.8 percent, at $1,292.20 per ounce.

Weak U.S. data also pressured the dollar. New orders for U.S.-made capital goods unexpectedly fell in October after three straight months of strong gains and a measure of goods orders that strips out volatile components had its biggest drop since September 2016.

The Fed minutes, published at 2 p.m. EST (1900 GMT), showed policymakers expect interest rates will have to be raised in the "near term."

"There weren't any surprises within the Fed minutes," said Michael Matousek, head trader at U.S. Global Investors in San Antonio. He said he expected gold to come under pressure eventually when the Fed does raise interest rates.

"You can expect to see the incremental seller of gold, who is walking the fine line between balancing the portfolio allocation and interest rate expectation."

Rising rates tend to boost the dollar, making gold more expensive for holders of other currencies. Rising bond yields also reduce the appeal of non-yielding gold.

"Firmer core inflation readings in the year ahead should push the 10-year Treasury yield higher," said Nick Exarhos, senior economist at CIBC World Markets in Toronto.

Investors were keen to own gold to hedge against risks including a fall in global stock markets from current record highs, Saxo Bank analyst Ole Hansen said, predicting gold would rise to $1,325 by the end of the year. {MKTS/GLOB]

However, rising U.S. interest rates through next year were likely to strengthen the dollar and put pressure on gold, said Julius Baer analyst Carsten Menke.

On the technical side, gold broke through resistance at the 50-day moving average around $1,286, analysts at ScotiaMocatta said in a note.

Silver was up 1.3 percent at $17.15 an ounce.

Platinum was up 0.8 percent at $940.90 an ounce and palladium was up 0.8 percent at $1,005.20 an ounce, after touching $1,007.20, its highest since Nov. 10.

(Additional reporting by Vijaykumar Vedala in Bengaluru; Editing by Andrew Heavens, James Dalgleish and David Gregorio)