Gold eases as markets await Fed minutes for direction

By Pablo Sinha

Gold prices eased on Tuesday, trading below a two-week high, with investors awaiting minutes of U.S. Federal Reserve's June meeting for insight into Chair Kevin Warsh's monetary policy direction.

Spot gold TVC:GOLD fell 0.9% to $4,126.33 per ounce by 0458 GMT, while U.S. gold futures TVC:GOLD for August delivery eased 0.7% to $4,137.60.

"Gold price action looks like a little bit of a continuation of last week, some basing out, forming a support level, obviously waiting for a little bit of direction from the Fed minutes to get a bit more sense around what the Fed's thinking is on the short-term interest rate policy," said Nicholas Frappell, global head of institutional markets at ABC Refinery.

Minutes of the Federal Open Market Committee's June 16-17 meeting will be released on Wednesday.

Warsh's first meeting as chair removed references to what sort of rate adjustments the Fed might make, arguing that it can make a central bank less nimble in responding to new economic developments.

Fed Governor Christopher Waller on Monday, however, offered a contrast, saying it can be a "valuable tool" that speeds the impact of monetary policy under the right circumstances.

Bullion hit a two-week high on Monday as a ceasefire deal eased some of those inflation concerns, while last week's weaker-than-expected U.S. jobs data prompted markets to dial back near-term interest rate-hike expectations.

Still, gold prices are down more than 25% from record highs hit earlier this year, as the U.S.-Israeli war with Iran has stoked inflation concerns, boosted the dollar and reinforced expectations of interest rate hikes.

Traders now see about a 56% chance of a rate increase in September, down from more than 60% before the data, according to the CME FedWatch tool.

Higher interest rates make non-yielding bullion less attractive for investors.

Hong Kong launched a central clearing system for gold on Tuesday and also revived gold futures trading as it seeks to become a regional reserve hub for the precious metal.

Spot silver BIST:XAGUSD1! slipped 2% to $60.85 per ounce, platinum NYMEX:PL1! eased 1.2% to $1,611.38, and palladium BIST:XPDUSD1! lost 0.6% to $1,261.16.