Gold prices inched higher after tapping a nearly six-year low on Wednesday as the market reacted to the minutes of a recent US Federal Reserve meeting that gave mixed signals about a poossible rate hike in December. A solid core of Fed officials rallied behind a possible December rate hike at the central bank's last policy meeting, but central bankers also debated evidence the US economy's long-term potential may have permanently shifted lower.
"The October minutes indicate that a December rate move is not yet settled with the doctrinaire doves continuing to battle against what they believe is a hasty hike," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
"The committee's indecision is translating into some volatility for gold and silver."
Prior to release of the minutes, some Fed officials continued to flag December as a likely time for interest rates to rise after seven years near zero, with two expressing confidence they will be able to pull it off smoothly despite fears of an abrupt market reaction.
Spot gold was up 0.1 percent at $1,070.70 an ounce at 2:44 pm EST (1944 GMT), after falling to $1,064.95 earlier, the lowest since February 2010. US gold futures for December delivery settled up 10 cents at $1,068.70 an ounce. Silver pared losses and was down 0.5 percent at $14.11 an ounce, having earlier dropped to a 2-1/2-month low at $13.99 an ounce. Platinum was down 1 percent at $841.75 an ounce, after falling to a seven-year low at $840.40 an ounce. Palladium was down 1.5 percent at $532.75 an ounce, after falling to $525 an ounce, the lowest since late August.
Spot gold prices were on track to settle higher, if only slightly, for the first time in seven sessions after falling on pressure from prospects for the first US interest rate hike in nearly a decade in December. Prior to the minutes, market odds for a December hike moved to 66 percent from around 30 percent.
Higher rates would increase the opportunity cost of holding the non-yielding metal. "The market is focused on a December rate hike and the positioning in gold has become quite bearish again very rapidly in the futures market," Julius Baer analyst Carsten Menke said prior to the release of the Fed minutes. The dollar steadied against a basket of currencies, retreating from an earlier seven-month high, while US shares rose.
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