Tags: gold | dollar | Fed | metals

Gold Steady Above $1,200 as June Rate Hike Prospects Dim

Thursday, 21 May 2015 01:29 PM

Gold held above $1,200 an ounce on Thursday as minutes from the Federal Reserve's policy meet showed the U.S. central bank was unlikely to hike interest rates in June, in line with market expectations.

Spot gold was steady at $1,209.60 an ounce by 0658 GMT, after gaining 0.2 percent in the previous session.

Minutes of the Fed's April meeting, released on Wednesday, showed policymakers believed it would be premature to hike interest rates in June, a view that is already widely held in the market following disappointing U.S. economic data.

The minutes showed Fed officials pushing the prospect of a rate hike later into the year.

"Gold will benefit from the Fed's decision to postpone their rate hike and the bar for gold's support level look to be raised from here," said Howie Lee, an analyst at Phillip Futures.

Rising rates tend to weigh on gold because they increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. Gold prices have struggled to break out of a $1,170-$1,230 an ounce range since mid-March, hamstrung by uncertainty over the timing of an expected rise in U.S. interest rates.

"If gold manages to break above $1,220 decisively, we think a sustained rally in prices would probably materialize," said Lee.

However, investor sentiment has turned bearish in recent days, as the metal prices have fallen off from three-month highs reached earlier this week. Outflows in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, continue to undermine investor sentiment.

Holdings of the fund fell 0.41 percent to 715.26 tonnes on Wednesday, the lowest in four months. Recent gains in the dollar have also limited gold's upward move.

The dollar traded near a two-week peak against a basket of major currencies early on Thursday, having held on to most of its gains after closely watched minutes from the Fed's April meeting contained no major surprises.

A stronger greenback makes gold more expensive for holders of other currencies, while also reducing the metal's appeal as a hedge.

© 2017 Thomson/Reuters. All rights reserved.

 
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Gold held above $1,200 an ounce on Thursday as minutes from the Federal Reserve's policy meet showed the U.S. central bank was unlikely to hike interest rates in June, in line with market expectations.
gold, dollar, Fed, metals
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2015-29-21
Thursday, 21 May 2015 01:29 PM
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