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Gold slips on firmer dollar, Fed policy path in focus

China's Jan-Sept gold consumption down 4.36% y/y Gold in for a better year in 2023

October 29, 2022 00:00:00

Gold prices fell on Friday as the dollar gained ground, while caution set in ahead of the U.S. Federal Reserve's policy meeting next week that will be watched for any hint of an easing in its pace of rate rises, reports Reuters.

Spot gold slipped 0.7% to $1,651.52 per ounce as of 0803 GMT, while U.S. gold futures were down 0.6% at $1,656.10.

The dollar index rose 0.3%, hurting gold's allure for those holding other currencies. However, the greenback was headed for a weekly drop amid speculations of a Fed pivot.

"Gold should trade in a range of $1,640-$1,660 till there is an outcome from the Fed," said Jigar Trivedi, a senior analyst at Mumbai-based Reliance Securities.

The outlook for gold still appears bearish, with investment demand still weak, while retail demand too has not been aggressive, said Trivedi.

While the Fed is likely to announce another 75-basis point (bps) rise next week, traders expect a half-point increase in December. Expectations of a more dovish Fed got a boost from data that showed U.S. third-quarter consumer spending slowed to 1.4%, offering new evidence that the economy is cooling.

The Fed's sharp rate hikes since March have driven gold down 9% this year, as it increases the opportunity cost of holding zero-yielding bullion, while boosting the dollar.

"Gold is in for a better year in 2023 as the Fed pivot will have to arrive at some point ... and the chickens may come home to roost as economies falter in a high-interest environment," said City Index analyst Matt Simpson.

"So, gold could glean from safe-haven demand."

On the physical front, China's gold consumption fell 4.36% in the first nine months of the year as the top consumer grappled with COVID-19, the China Gold Association said.

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