Gold rises on a softer dollar as the Federal Reserve signals a slowdown in rate hikes

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Gold prices rose to nearly a one-week high on Thursday on a weaker dollar, after minutes from the U.S. Federal Reserve’s November meeting suggested it may soon slow interest rate hikes.

Spot gold was up 0.3% at $1,754.13 an ounce by 2:05 p.m. ET (1905 GMT), while U.S. gold futures were up 0.5% at $1,754.30.

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Minutes of the Fed meeting in Nov. A 1-2 policy meeting released on Wednesday showed that a “substantial majority” of Fed policymakers agreed that it “probably will soon be appropriate” to slow rate hikes.

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The dollar index was 0.2% lower, making bullion cheaper for foreign buyers.

“Investor expectations are moving towards the Fed,” said Carlo Alberto De Casa, an outside analyst for Kinesis Money, adding that a weaker US dollar was also a positive driver for bullion.

High interest rates have kept a lid on gold’s traditional position as a hedge against inflation and other uncertainties this year, translating into a higher opportunity cost of holding the non-yielding asset.

The Federal Reserve delivered its fourth consecutive 75 basis point (bps) rate hike earlier this month, and market participants now widely expect a 50 basis point rate hike at the December meeting.

Rising real rates until early 2023 remained a challenging backdrop for underperforming gold, ANZ analysts said in a note.

But heightened recessionary and geopolitical risks until 2023, strong physical demand from emerging markets and record central bank purchases suggest gold can still outperform relative to real rates, ANZ added.

Silver was down 0.3% at $21.45 an ounce, platinum was down 0.9% at $987.78, while palladium was little changed at $1,881.72.

Market activity was likely to be muted due to the US Thanksgiving holiday. (Reporting by Kavya Guduru in Bengaluru, Additional reporting by Seher Dareen; Editing by Maju Samuel, Mark Potter and Jonathan Oatis)

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