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Gold up With Dollar at 2-Week Low; Fed Not Dovish Enough for Some

By Barani Krishnan

Investing.com - The Federal Reserve signaled it won't be easing as yet. In fact, it may be more inclined to hike.

And the funds that have pushed the precious metals up in the past week might register their disappointment in Thursday's trading.

Spot gold, reflective of trades in bullion, was up $3.87, or 0.3%, at $1,307.97 an ounce by 4:40 PM ET (20:40 GMT), after hitting a two-week high at $1,30.65.

Gold futures for June delivery, traded on the Comex division of the New York Mercantile Exchange, settled the official session up $5.60, or 0.4%, at $1,313.90 per ounce. It hit a two-week high of $1,314.65 earlier.

Federal Reserve officials have left room (just a little bit) for the possibility of interest rate increases before the end of the year should economic conditions improve, minutes from their March meeting, released after Wednesday's settlement in precious metals, showed. But a majority of Fed members did say they expected rates to remain on hold in 2019.

A rate hike would set the Fed on a collision course with President Donald Trump, who's criticized the central bank's four increases over 2018 as reason for slower U.S. growth this year and now wants it to drop rates to restore some strength to the economy.

A hike in rates would be bearish for gold.

The dollar extended its weaker trajectory for the week as speculation built ahead of Wednesday's release of the Fed minutes that the central bank may actually be pressured into doing Trump's bidding.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, fell by 0.1% to 96.537 after a two-week low earlier at 96.453.

Traders were "trying to read the tea leaves to see if there is any significant information that the Fed chairman (Jerome Powell) didn’t talk about at his last news conference" and will likely react to the update in Thursday's session, Walter Pehowich, executive vice president at Dillon Gage Metals in Addison, Texas, wrote in a note.

Gold was supported in earlier Wednesday trade on expectations that euro zone economies would remain vulnerable from the European Central Bank's decision to stick to its ultra-easy monetary policy.

Palladium slid after a two-day run-up, but remained the world's priciest metal.

Spot palladium was down $2.05, or 0.2%, at $1,389.80 an ounce. The silvery-white auto-catalyst metal, used for purifying gasoline emissions, traded some $300 above gold early last month before cutting that premium to about less than $100 lately.

Trades in other Comex metals as of 4:40 PM ET (20:40 GMT):

Palladium futures down 75 cents, or 0.1%, at $1,361.85 per ounce.

Platinum futures up $8.15, or 1%, at $907.45 per ounce.

Silver futures flat at $15.20 per ounce.

Copper futures down 1 cent, or 0.4%, at $2.94 per pound.

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