Gold whipsaws as Fed is split on support for rate rise
New York
THE split among Federal Reserve officials on whether to boost US borrowing costs is whipsawing gold again.
Futures gained on Thursday, a day after the July Fed minutes were released showing policymakers are divided on rates, only to swing to a loss on Friday.
Comments from Fed Bank of San Francisco president John Williams after gold futures closed on Thursday revived the bearish sentiment on the precious metal, paring the week's gains.
The rally that sent gold to its best first half in almost four decades is slowing amid signs that the US economy is resilient enough to face an increase in interest rates, despite risks to global growth.
Fuelling that speculation are voices from policymakers who favour the rate hike, including Mr Williams and New York Fed president William Dudley.
Their comments boosted the dollar, curbing the appeal of commodities for holders of other currencies.
"Today, gold suffers from Fed indecision, pulled down by higher rate outlook fostered by many Fed speakers" George Gero, a managing director for RBC Wealth Management in New York, said in an e-mail.
"We need higher open interest, higher closes, higher moving averages to attract asset allocators," he added.
Gold futures for December delivery slid 0.8 per cent to settle at US$1,346.20 an ounce at 1.39 pm on Friday on the Comex in New York, paring the week's gain to 0.2 per cent.
Mr Williams said on Thursday that it makes sense to get back to a pace of gradual increases, preferably sooner rather than later.
On Tuesday, Mr Dudley said the Fed could potentially raise interest rates as soon as next month, while Atlanta Fed president Dennis Lockhart said he's confident that US economic growth is accelerating, setting the stage for at least one increase in interest rates this year.
"The market remains very twitchy around anything that relates to the Fed," said Neil Meader, an analyst at Metals Focus Ltd in London. "This period of consolidation we've seen in prices is a reflection of the lack of clarity on when the next increase will occur."
In ETFs and other metals:
Meanwhile, zinc declined with most metals, retreating from the highest level in 15 months, as investors took a breather from a 42 per cent increase this year and a rebounding dollar made commodities more expensive in other currencies.
The dollar pared its longest slump since April as traders weighed whether a divided Federal Reserve will raise US interest rates this year.
"The dollar just took off like a missile and hasn't looked back, and that's hurting metals," Peter Thomas, a senior vice-president at metals broker Zaner Group LLC, said by telephone from Chicago.
"The hawkish statements by the Fed are starting to settle into the market and you can see it's being reflected within the market."
Zinc, used to galvanise steel, fell 0.4 per cent to settle at US$2,286 a tonne at 5.50 pm on the LME.
On Thursday, it closed at US$2,295.50, the highest since May 2015. Copper, aluminium and lead also declined on the LME, while nickel and tin rose.
"The buyers have finally run out of steam, there are no more buyers up at those high levels," said Andrew Silver, a London-based analyst at Triland Metals Ltd.
"There's a bit of dollar strength on Friday and some profit-taking at the end of the week."
Zinc has little upside from these levels because miners will probably resume production after prices exceeded output costs, Ji Xianfei, an analyst with Guotai Junan Futures Ltd, said by telephone from Shanghai.
Traders and analysts turned bearish on copper amid worries over demand, from neutral a week ago, according to a Bloomberg survey. BLOOMBERG
