Gold struggles as US rate hike looms

[MANILA] Gold was trapped in narrow ranges on Tuesday, struggling to move higher as investors looked to a near-term increase in US interest rates in the face of mostly firm economic signals.

Gold ended a seven-week losing streak last week as China's shock devaluation of its yuan helped spur some safe-haven bids. With the yuan since stabilising, market focus has shifted back to a looming hike in US interest rates.

But investors may have fully discounted any rate increase this year, said Mark To, head of research at Hong Kong's Wing Fung Financial Group, given the relative stability in gold prices. "For one to two weeks, it's going to oscillate around US$1,100," Mr To said. "I think the rate hike has already been discounted fully whether it happens in September or December." Spot gold was flat at US$1,117.80 an ounce by 0255 GMT, after rising modestly on Monday.

Bullion scaled a three-week high of US$1,126.31 last week as the yuan devaluation fueled some speculation that the Fed could hold off on raising interest rates this year.

US gold for December delivery was similarly little changed at US$1,117.40 an ounce.

Data on Monday showed US homebuilder sentiment rose in August to its highest level since a matching reading almost a decade ago, helping counter a plunge in New York manufacturing activity to its weakest since 2009.

Solid jobs growth, rebounding retail sales and a housing sector on the mend suggest the Federal Reserve is on track to raise interest rates this year, perhaps at the next policy meeting in September.

That had weighed on the price of non-interest bearing gold. There should be more clues on the Fed's thinking regarding interest rates when the minutes of the US central bank's July 28-29 meeting are released on Wednesday.

Investors withdrew US$2.3 billion from gold exchange-traded products in July as the dollar strengthened.

Spot silver dipped 0.4 per cent to US$15.25 an ounce, while platinum was steady at US$993 and so was palladium at US$611.50.

REUTERS