On Tuesday (November 22), international gold prices rose as the U.S. dollar index fell. Around the possible adjustment of the Fed’s policy outlook, investors’ focus turned to the upcoming minutes of the Fed’s November meeting to look for clues about future interest rate hikes.
At 15:28 Beijing time, spot gold rose 0.22% to $1,741.65 an ounce; the main COMEX gold futures contract rose 0.17% to $1,742.6 an ounce; the U.S. dollar index fell 0.11% to 107.726.
The minutes of the Fed’s November meeting will be released at 3 o’clock Beijing time on Thursday (November 24). Most traders are betting that the Fed will raise interest rates by 50 basis points in December. A 75-basis-point hike is less than 25% likely after recent comments from Fed officials.
Cleveland Fed President Loretta Mester said it makes sense to slow down the pace of rate hikes a bit and that the central bank could start lowering the pace of rate hikes starting next month. But she further added: “We have some good news on inflation, but need more and sustained good news”. She sees no reason to pause rate hikes yet.
Phillip Futures analyst Avtar Sandu said in a note that Mester’s dovish comments were a “relief for the gold bulls” and that the only factor that could push gold back below $1,700 was “an unexpected uptick in U.S. CPI.”
Elsewhere, San Francisco Fed President Daly said she was not prepared to say what the Fed should do at the December FOMC meeting, but was in favor of the Fed slowing down its pace of rate hikes.
Stephen Innes, managing partner at SPI Asset Management, said: “With investors not expecting any new substantive information, the possible threat from the minutes is that the FOMC will play down any possibility of policy shifting from tightening to easing in a hawkish manner. . But overall, bets on more benign inflation should support gold investors’ bets on a recession in the first half of next year and the Fed’s eventual shift to rate cuts.”
Western sanctions on Russia following its invasion of Ukraine have forced some countries to reduce their reliance on the strong dollar. Some countries are loading trucks with gold to be self-reliant in case of any unrest. According to the World Gold Council’s November report, central banks bought a net 399.3 tonnes of gold between July and September, more than four times the amount in the same period last year. Central banks of Turkey, Uzbekistan and India reported purchases of 31.2 tonnes, 26.1 tonnes and 17.5 tonnes respectively.