Gold turned higher as the dollar shifted lower on Wednesday, after minutes from the last US Federal Reserve meeting showed uncertainty among policymakers about the new Trump administration's economic program. Still, many Fed policymakers said it may be appropriate to raise interest rates "fairly soon" should jobs and inflation data come in line with expectations, minutes of their Jan. 31-Feb. 1 policy meeting showed.
Spot gold was up 0.1 percent at $1,237.48 an ounce by 2:56 p.m. EST (1956 GMT), while US gold futures settled down 0.5 percent at $1,233.30, prior to the release of the minutes.
The US dollar, which was boosted by hawkish comments from various Fed officials in the previous session, turned lower after the minutes were released. "Gold rallied after the January Fed minutes suggested that voting members were relaxed about having 'ample' time to respond to inflation pressure," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
"It remains to be seen if their sanguine outlook has given the recently tentative gold bull the testosterone shot it needs to break decisively higher." Gold is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion, while also boosting the dollar.
"Our economists expect three rate hikes in 2017 and see the probability of a rate hike by June at 80 percent, and we see US long-dated real rates rising slightly, placing downward pressure on gold," Goldman Sachs said in a note. On Tuesday, Philadelphia Fed President Patrick Harker suggested he would support an interest rate increase at the US central bank's mid-March policy meeting as long as inflation, output and other data continue to show the US economy is growing.
"The key thing is that geopolitics and inflation have nudged themselves to the top of the queue as the key drivers of gold," said Ross Norman, chief executive officer of Sharps Pixley, prior to release of the minutes. Investors were also looking ahead to an address by US President Donald Trump to Congress next week at which he is expected to announce tax policies. Spot silver rose 0.6 percent at $18.04 an ounce, and platinum rose 0.3 percent at $1,002.45. Palladium dropped 1.6 percent to $766.75. "Strength in palladium is still remarkable given that car sales have been somewhat weak in January, especially in China," said Carsten Menke, commodities research analyst at Julius Baer in Switzerland.
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