Gold Loses Ground on Prospect for Hawkish Fed

By David Hodari Features Dow Jones Newswires

Gold prices continued to pull back Wednesday, as the dollar built on recent gains amid growing expectations for another interest rate increase from the Federal Reserve before the end of the year.

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The precious metal was down 0.37% at $1,280.78 a troy ounce in midmorning trade.

Copper prices also moved lower on that renewed dollar strength, falling 0.33% to $7,017 a metric ton having surged to three-year highs earlier in the week.

The WSJ Dollar Index, which measures the currency against a basket of 16 others, was up 0.26% at 86.83. A stronger dollar makes dollar-denominated metals more expensive for holders of other currencies.

President Donald Trump on Tuesday said that he was nearing a decision on the next Federal Reserve chairperson, and his short-list of candidates included several advocates of higher rates.

Kevin Warsh and John Taylor--who have both criticized the central bank's recent dovish policies--were among the five finalists. Also among the front-runners is Fed governor Jerome Powell, who is in favor of gradually raising interest rates.

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That Fed-driven dollar strength was generating selling pressure across commodities markets, Commerzbank said in a morning note.

Data from CME Group showed that 98.2% of traders are betting that the Fed will raise rates in December.

The stronger dollar outweighed further language from North Korea threatening nuclear war with the U.S. to drive gold markets, said Ipek Ozkardeskaya, senior market analyst at London Capital Group.

Metals investors were also watching China's Communist Party Congress, which began earlier Wednesday, for any signals as to the government's growth policy.

In his opening speech, President Xi Jinping reiterated previous government promises to open the service sector to more foreign investment and further liberalize interest rates.

Among precious metals, silver fell 0.47% to $16.95 a troy ounce, platinum fell 0.92% to $925.45 a troy ounce, and palladium fell 0.28% to $978.25 a troy ounce.

Among base metals, zinc rose 0.52% to $3,090.50 a metric ton, aluminum fell 1.17% to $2,117 a metric ton, tin fell 0.78% to $20,230 a metric ton, nickel rose 0.21% to $11,795 a metric ton and lead fell 0.82% to $2,475 a metric ton.

Stephanie Yang, Peter Nicholas, Kate Davidson and Nathaniel Taplin contributed to this article.

Write to David Hodari at David.Hodari@wsj.com

(END) Dow Jones Newswires

October 18, 2017 06:51 ET (10:51 GMT)