Gold steady as US dollar dips; rate hike expectations cap gains

[BENGALURU] Gold prices held steady on Thursday, after rising nearly half a percent in the previous session, as the US dollar edged down, but views on higher US interest rates limited gains.

Spot gold was mostly unchanged at US$1,205.58 an ounce at 0028 GMT. Prices hit their highest since Aug 10 at US$1,214.28 on Tuesday.

US gold futures were also mostly steady at US$1,211.82 an ounce on Wednesday.

The US dollar index, which measures the greenback against a basket of currencies, was down 0.1 per cent at 94.528.

Gross domestic product grew at a 4.2 per cent annualised rate, the Commerce Department data showed in its second estimate of GDP growth for the second quarter. That was slightly up from the 4.1 per cent pace of expansion reported in July.

The data cemented expectations for a US rate hike next month, with a 96 per cent probability, according to fed funds futures.

The US Federal Reserve should be ready to lift interest rates for a longer period or even more quickly than currently expected to insure against a jump in inflation in a US economy operating in the vicinity of full employment.

Higher rates dent the appeal of non-interest-yielding gold.

The leaders of the United States and Canada expressed optimism on Wednesday that they could reach a new North American Free Trade Agreement (Nafta) deal by a Friday deadline as negotiators prepared to talk through the night, although Canada warned that a number of tricky issues remained.

Asian stocks rose on Thursday as Wall Street hit record highs in the hope that the current Nafta negotiations will lead to a further easing of global trade tensions.

The first support for gold is at US$1,200 per ounce and the next key level is US$1,180, said ActivTrades chief analyst Carlo Alberto De Casa. Rising above US$1,210 would be a first positive impulse, he added.

A strike at AngloGold Ashanti's Siguiri gold mine in Guinea has halted operations there, mines ministry secretary-general Saadou Nimaga said on Wednesday.

Three South African unions said on Wednesday that wage negotiations in the gold sector had hit a deadlock and they had declared a dispute, a move that is one step short of a strike.

REUTERS