Gold slips after comments from US Fed governor lift dollar

[BENGALURU] Gold prices fell to a one-week low on Friday, weighed down by gains in the dollar after Federal Reserve Governor Christopher Waller called for early tapering of economic support to help chart a tighter monetary policy.

Spot gold fell 0.6 per cent to US$1,848.05 per ounce by 14:42 ET (1942 GMT). US gold futures settled 0.5 per cent lower at US$1,851.60.

The dollar index rose 0.5 per cent against its rivals, making gold more expensive for other currency holders.

"Gold prices are declining after some hawkish Fed speak about accelerated tapering boosted the dollar," said Edward Moya, senior market analyst at brokerage OANDA.

"Inflation and Fed speak are the primary catalyst for gold and right now traders will need to see what happens over the next couple of weeks before having strong conviction on assessing what the Fed will do regarding interest rates."

Waller said the US central bank should increase the pace of its reduction in bond purchases to give more leeway to raise interest rates from their near zero level.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Stock markets went into a tailspin after news that Austria would reimpose a full lockdown o tackle a new wave of coronavirus infections and signs that Germany might do the same.

Saxo Bank analyst Ole Hansen said in a note that lockdowns in Europe have helped provide the yellow metal a fresh boost.

"The recent white-hot inflation prints, especially the 6.2 per cent recorded in the US, will likely continue to support gold in its defence against the stronger dollar," Hansen added.

Elsewhere, silver fell 0.6 per cent to US$24.63. Platinum slid 1.8 per cent to US$1,028.74, while palladium declined 3.4 per cent to US$2,060.24, on course for its first weekly decline in three.

REUTERS