Gold firm as Fed comments signal potential end to US rate hikes

Gold prices held near their highest levels in more than a week on Wednesday as comments from U.S. Federal Reserve officials suggested that a recent surge in Treasury yields might reduce the need for more rate hikes, sending the dollar lower.

FUNDAMENTALS

* Spot gold was up 0.1 per cent at $1,860.97 per ounce by 0136 GMT, having hit its highest level since September 29 on Tuesday. U.S. gold futures held their ground at $1,874.50.

* The dollar dipped to a nearly two-week trough against a basket of currencies, tracking a slide in U.S. Treasury yields after dovish comments from several Fed officials.

* It’s “possible” that the recent rise in yields on longer-term Treasuries means the Fed need not raise interest rates as much as otherwise, Minneapolis Fed President Neel Kashkari said on Tuesday.

* Atlanta Fed President Raphael Bostic said the U.S. central bank need not raise borrowing costs any further, and sees no recession ahead.

* With U.S. inflation down from its peak, the risk of raising interest rates too little no longer far outweighs the risk of raising rates too much, San Francisco Fed President Mary Daly said.

* Higher rates raise the opportunity cost of holding gold, which is priced in dollars and does not yield any interest.

* Even as the U.S. economy bounds along, rising interest rates on government bonds could threaten the plans of elected officials and central bankers who thought they had set the stage for a steady period of ongoing growth, low unemployment and gradually falling inflation.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell on Tuesday.

* Elsewhere, spot silver rose 0.1 per cent to $21.84 per ounce, platinum gained 0.2 per cent to $882.21 and palladium added 0.1 per cent at $1,170.46. DATA/EVENTS (GMT) 1230 US PPI Machine Manuf’ing Sept 1800 US Federal Open Market Committee issues minutes from its Sept. 19-20 meeting