Gold stalls near 8-week highs on Fed pause hopes

By Ashitha Shivaprasad

(Reuters) – Gold prices hovered near an eight-week peak on Wednesday after recent economic data re-ignited hopes that the U.S. Federal Reserve may soon hit pause on its interest rate-hiking cycle.

Spot gold eased 0.1% at $1,977.25 per ounce by 01:43 p.m. ET (1743 GMT), as the U.S. dollar ticked up from 15-month lows. [USD/]

U.S. gold futures settled unchanged at $1,980.80.

On Tuesday, gold hit its highest since May 24 at $1,984.19, before settling about 1.2% higher after U.S. retail sales rose less than expected in June.

“The market is very confident that rate hikes will end soon and disinflation is in place. After the Fed meet, if the market is convinced the Fed will no longer maintain the extremely hawkish stance, gold prices could reach $2,000,” said Edward Moya, senior market analyst at OANDA.

A Reuters poll predicted the Fed would raise its benchmark overnight interest rate by 25 basis points on July 26, with most economists expecting that would be the last increase of the current tightening cycle.

Higher rates make interest-bearing investments more attractive than zero-yield bullion.

Investors will also keep a tab on weekly jobless claims data due on Thursday.

But “with the Fed set to hike next week, and a level of uncertainty and data dependence thereafter, speculators have been unwilling to fully buy-in to the bullish gold narrative,” TD Securities wrote in a note.

Silver rose 0.3% to $25.15 per ounce, platinum lost 1% to $973.00 and palladium dipped 1.1% to $1,305.17.

“Until there’s more confidence in China’s recovery and an improved demand outlook, the industrial metals market might struggle in the near term,” Moya added.

Data showed China’s fiscal revenue grew at a slower annual pace in the first six months, signalling broadening economic pressures that have fanned expectations of fresh stimulus.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Mike Harrison, Shilpi Majumdar and Krishna Chandra Eluri)