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Gold pares gains as dollar strength, rate-hike fears dominate mood

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Gold prices pared gains on Tuesday under

pressure from concerns about rapid interest rate hikes to tame

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inflation and an overall stronger U.S. dollar.

Spot gold was up 0.1% at $1,712.09 per ounce as of

1018 GMT. Prices hit a one-week high, rising nearly 1%, earlier

in the session.

U.S. gold futures were little changed at $1,722.40.

“Ultimately, spot gold is set to remain beholden to shifting

expectations surrounding the Fed’s ongoing battle against

inflation,” said Han Tan, chief market analyst at Exinity.

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Focus this week will be on the European Central Bank meeting

on Thursday, where it is expected to deliver a 75 basis-point

interest rate hike to tame surging prices.

Traders also expect a big interest rate hike from the U.S.

Federal Reserve at its Sept. 20-21 policy meeting.

The dollar took a breather on Tuesday after a

sweeping rally, but remained near its recent peak. A stronger

dollar makes gold expensive for overseas buyers.

“Although dollar’s slight pullback has eased some of the

immediate downward pressures on gold, gold’s upside remains

significantly capped by the resilient U.S. dollar,” Tan added.

Gold is regarded as a safe-haven investment amid economic

uncertainties. But investors opt for other assets in a

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high-interest rate environment as gold yields no interest.

“What could come to its (gold’s) rescue is weaker macro data

(the August jobs number helped) and lower inflation readings…

But until that happens, rallies remain vulnerable,” Edward Meir,

an analyst with ED&F Man Capital Markets, wrote in a note.

Meanwhile, India’s gold imports in August halved from a

year ago, a government source told Reuters.

Elsewhere, spot silver rose 0.9% to $18.32 per ounce,

platinum was 0.4% higher at $848.87 and palladium

gained 0.4% to $2,040.64.

(Reporting by Ashitha Shivaprasad and Brijesh Patel in

Bengaluru; editing by Krishna Chandra Eluri and Jason Neely)



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