Gold holds decline as investors await Federal Reserve minutes

[SINGAPORE] Gold held its decline as investors await the release of minutes from the Federal Reserve's last policy-setting meeting to look for signals on the timing of the next rate increase.

The metal for immediate delivery traded at US$1,254.96 an ounce at 9:06am in Singapore, from US$1,252.80 on Tuesday when it fell 0.5 per cent, according to Bloomberg generic pricing. Bullion is up 18 per cent this year.

Gold's 25 per cent rally in the first half has fizzled on the looming probability of higher US borrowing costs, which would boost the US dollar and damp the appeal of non-interest bearing bullion.

Investors will be scouring the Federal Open Market Committee's Sept 20-21 meeting record for evidence that Fed Chair Janet Yellen is under pressure from a hawkish group of officials to tighten monetary policy soon. Three of 10 voters on the FOMC dissented in the decision to hold in September, arguing for a rate increase instead.

The dissenting voices and recent strong US economic data mean that "traders could price in a higher probability of a rate hike during the December meeting," Vyanne Lai, an economist at National Australia Bank Ltd, said by e-mail.

"This would in turn be bearish on gold prices in the near-term."

Traders currently assign about a two-thirds chance of a December hike, based on prices for federal funds futures contracts, and a less than 20 per cent chance of a move next month.

BLOOMBERG