Gold retreats as Fed officials hint at big rate hikes

GOLD prices slipped on Thursday (Aug 11), as the dollar and Treasury yields rebounded after comments from Federal Reserve officials pointed to aggressive interest rate hikes despite signs of slowing US inflation.

Spot gold fell 0.2 per cent to US$1,788.07 per ounce, as of 1.23 am GMT, after hitting its highest since Jul 5 at US$1,807.79 on Wednesday.

US gold futures dipped 0.5 per cent to US$1,805.10.

US consumer prices did not rise in July due to a sharp drop in the cost of petrol, delivering the first notable sign of relief for Americans who have watched inflation climb over the past 2 years.

However, Minneapolis Fed bank president Neel Kashkari said that he continues to believe that the US central bank will need to raise its policy rate to 3.9 per cent by year-end and to 4.4 per cent by the end of 2023 to fight inflation.

Chicago Fed president Charles Evans remained more hawkish than financial markets, expecting that US rates will top out at 4 per cent next year.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

The dollar index regained some footing to trade up 0.1 per cent at 105.280 after falling to its lowest since Jun 29 at 104.630 on Wednesday.

Benchmark US 10-year Treasury yields also rebounded to 2.7860 per cent, increasing the opportunity cost of holding non-interest bearing gold.

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Gold prices subdued as investors await US inflation data

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.17 per cent to 997.42 tonnes on Wednesday from 999.16 tonnes on Tuesday.

Spot silver eased 0.2 per cent to US$20.53 per ounce, platinum rose 0.2 per cent to US$943.31, and palladium gained 0.2 per cent to US$2,244.33. REUTERS