Gold slips to over 1-week low as Fed policy clouds outlook

(Reuters) – Gold prices fell for a fourth straight session on Monday due to a stronger dollar, with the U.S. Federal Reserve’s monetary policy stance clouding the outlook for non-yielding bullion.

Spot gold was down 0.4% at $1,742.84 per ounce as of 1317 GMT, after earlier hitting its lowest level since Nov. 10 at $1,735.90. U.S. gold futures shed 0.6% to $1,743.30.

“We’ve had several senior Fed officials… saying that the rate hiking cycle still has a way to go… that is offering support to the dollar and therefore capping the upside for gold,” said Ricardo Evangelista, senior analyst at ActivTrades.

The dollar rose 0.8%, making greenback-priced bullion more expensive for overseas buyers. [USD/]

Investors will keep a close eye on minutes from the Federal Reserve’s November meeting due on Wednesday, with market participants pricing in a half-point rate increase in December following recent comments by Fed officials.

“With likely ongoing outflows from gold ETFs driven by further U.S. rate hikes, we expect gold to trade down to $1,600/oz by the end of the year,” said UBS analyst Giovanni Staunovo. [GOL/ETF]

Higher interest rates sour the appeal of gold, traditionally a hedge against inflation, as they raise the opportunity cost of holding bullion which yields no interest.

Investors are also keeping an eye on the economic fallout from fresh COVID-19 restrictions in top bullion consumer China.

Chinese physical gold premiums fell sharply last week as buying slowed.

Elsewhere, spot silver fell 1.2% to $20.67 per ounce.

“While the long-term fundamental outlook for silver remains positive, the short-term clouds brought by Fed hikes are blocking that sunny picture,” Kinesis Money analyst Rupert Rowling said in a note.

Platinum edged up 0.1% to $977.56 and palladium dropped 1.3% to $1,912.73.