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Gold on backfoot as Fed officials signal more rate hikes

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Gold prices retreated on Thursday from

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their highest levels in more than one month, as comments by U.S.

Federal Reserve officials pointed towards further interest rate

hikes, despite signs of easing inflation in the world’s largest

economy.

Gold is highly sensitive to rising U.S. interest rates, as

they increase the opportunity cost of holding non-yielding

bullion.

Spot gold was down 0.3% at $1,786.79 per ounce, as of

0712 GMT, after hitting its highest since July 5 at $1,807.79 on

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Wednesday.

U.S. gold futures dipped 0.6% to $1,802.10.

“Following U.S. inflation numbers, the dollar sold off very

sharply and yields also dropped, but by the end of the day, the

bond yields came back up…, which is hurting gold,” said Edward

Meir, an analyst with ED&F Man Capital Markets.

“Also, Fed officials said they still need to raise rates,

which are bearish for gold. We could see a pullback in gold

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prices in the short-term towards $1,780.”

Benchmark U.S. 10-year Treasury yields rebounded

to 2.7910%, after dropping as low as 2.6740% on Wednesday.

Data showed U.S. consumer prices did not rise in July due to

a sharp drop in the cost of gasoline, lifting hopes that the Fed

would be less aggressive on its tightening plans going forward.

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However, Fed policymakers noted that they would continue to

tighten monetary policy until price pressures were fully broken.

Limiting gold’s losses, the dollar was down 0.1%

against its rivals after falling to a 1-1/2 month low in the

last session.

On the technical front, spot gold may test a support zone of

$1,767 to $1,773 per ounce, a break below could open the way

towards $1,756, according to Reuters technical analyst Wang Tao.

Elsewhere, spot silver eased 0.3% to $20.53 per

ounce, platinum rose 1% to $951, and palladium was

steady at $2,240.64.

(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi

Aich, Sherry Jacob-Phillips and Subhranshu Sahu)

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