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Saturday, October 23, 2021

PRECIOUS-Gold holds steady near one-month high on softer dollar

* Gold rally to evaporate as quickly as it began – analyst

* Fed could start reducing stimulus by mid-Nov – minutes (Adds comment, updates prices)

Oct 14 (Reuters) – Gold prices held steady near a one-month high on Thursday as a softer dollar countered rising expectations that the Federal Reserve would tighten its policy earlier than anticipated.

Spot gold was little changed $1,792.10 per ounce by 0727 GMT. Prices touched a high since Sept. 16 at $1,795.81 on Wednesday on the back of a sharp retreat in the dollar and benchmark U.S. 10-year Treasury yields from recent highs.

U.S. gold futures eased 0.1% to $1,792.60.

“Markets have grown well-accustomed to the Fed’s tapering narrative, hence it would be interesting to see if tapering concerns will be superseded by stagflation fears as the primary driver of gold prices moving forward,” said Han Tan, chief market analyst at Exinity.

Further gains in gold may be soured by resurgent Treasury yields once the Fed officially kicks off its tapering process, he said.

U.S. consumer prices increased solidly in September and are likely to rise further amid surging energy prices. This could pressure the Fed to act sooner to normalise policy.

Minutes from the Fed’s September meeting showed the central bank could start reducing stimulus by mid-November. While a growing number of policymakers were worried that high inflation could persist longer than thought, they were split over how soon they may need to raise rates in response.

The dollar index was down 0.1% on the day, while benchmark yields crawled up.

“I expect both the U.S. dollar and long-dated rates to resume their climb sooner rather than later and the gold rally will evaporate as quickly as it began,” said Jeffrey Halley, a senior market analyst for Asia-Pacific at OANDA.

Reduced central bank stimulus and interest rate hikes tend to push government bond yields up, translating into a higher opportunity cost for holding gold that pays no interest.

Spot silver rose 0.3% to $23.13 per ounce, platinum gained 0.7% to $1,027.15 and palladium climbed 1.7% to $2,141.84. (Reporting by Eileen Soreng in Bengaluru; Editing by Amy Caren Daniel and Subhranshu Sahu)

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