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Gold eases as investors await Fed minutes

FILE PHOTO: Gold bars at the Austrian Gold and Silver Separating Plant ‘Oegussa’ in Vienna

By Harshith Aranya

(Reuters) – Gold eased on Monday, extending a sell-off that left the market with its worst week in five months as caution crept in ahead of the release of U.S. Federal Reserve minutes later this week.

Spot gold was down 0.2% to $1,940.73 per ounce by 0258 GMT. Gold fell 4.5% last week in its biggest decline since March as investors reassessed their positions after bullion retreated from a record peak of $2,072.50 scaled on Aug. 7. U.S. gold futures were flat at $1,950.50.

“A rise in real U.S. bond yields, profit-taking by investors, and lack of additional ‘negative economic news’ appear to have somewhat stifled gold’s upward trajectory,” said National Australia Bank economist John Sharma. “The fundamentals for gold though look sound.”

Benchmark U.S. bond yields rose to seven-week highs last week, denting bullion’s appeal by increasing the opportunity cost of holding the non-yielding metal.

Gold has risen about 28% so far this year as unprecedented global stimulus to ease the economic blow from the COVID-19 pandemic pushed investors to bullion as a hedge against possible inflation and currency debasement.

Investors are now awaiting the release of the minutes from the Federal Reserve’s last policy meeting for any hints of a possible change to the central bank’s guidance at its next review in September. The minutes will be released on Wednesday.

“The minutes document might suggest that the Fed is not in a hurry to expand the monetary support toolkit for now,” said DailyFx currency strategist Ilya Spivak.

“The sense of urgency could be reduced further if Democrats and Republicans manage to agree on another round of fiscal support.”

Silver slipped 0.5% to $26.28 per ounce. Platinum rose 1.3% to $947.85 and palladium gained 1.8% to $2,147.82.

Speculators reduced their bullish positions in COMEX gold and silver contracts in the week to Aug. 11, data showed on Friday.

(Reporting by Harshith Aranya in Bengaluru; Editing by Subhranshu Sahu)

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