Gold drops from 2 1/2-month high as Fed minutes hint at faster rate-hike pace

Gold futures dropped Thursday from the roughly 2 1/2-month high they settled at a day earlier, as minutes from the U.S. Federal Reserves March meeting hinted at a faster pace of interest-rate hikes.

President Donald Trump also appeared to walk back the immediacy of the U.S. response to a suspected chemical-weapons attack in Syria, dulling the metals haven appeal.

June gold
GCM8, -1.39%
fell $17.80, or 1.3%, at $1,342.20 an ounce. The contract had jumped over 1% Wednesday to settle at $1,360the highest finish since Jan. 25.

Read: Global economic growth was a blessing and cruse for 2017 silver demand

Fed meeting minutes released after golds close Wednesday reinforced the view that more interest-rate increases are on tap, pressuring metals prices in electronic trading, which had already strung together four days of gains without pause. Fed members also expressed their belief that inflation will pick up.

Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities, although some camps will always consider gold a hedge should inflation run too hot, even if the Fed is raising rates.

It would appear the central bank has laid the groundwork for another rate hike in June, which would leave them six months to implement the third that is forecast and also leave room for a fourth if its deemed necessary by the data in the interim, said Craig Erlam, senior market analyst with Oanda. That may be providing some relief for the greenback in the near-term but its really struggling to gather any upward momentum.

The ICE U.S. Dollar Index
DXY, +0.26%
which measures the greenback against six major rivals, was up 0.3% at 89.85. U.S. stock markets, meanwhile, climbed after Wednesdays pronounced drop.

Gold remained lower Thursday after a tweet from President Trump shed some doubt on the immediacy of U.S. strike against Syria, offsetting a worrisome tweet from just a day earlier.

Trump early Thursday indicated that any strike on Syria may not be imminent, as hinted at earlier this week, although he left open the possibility for such action. Trump on Wednesday signaled in a tweet that a missile attack on Syria wasnt far off, saying, Get ready, Russia.

Never said when an attack on Syria would take place. Could be very soon or not so soon at all! In any event, the United States, under my Administration, has done a great job of ridding the region of ISIS. Where is our Thank you America?

— Donald J. Trump (@realDonaldTrump) April 12, 2018

The possibility of a U.S. strike against Syrian President Bashar al-Assad has been growing since a suspected government-sanctioned chemical-weapons attack killed civilians in Damascus over the weekend. Russia has warned the U.S. not to launch an attack, saying itll shoot down any missiles.

Still, for as long as there is a risk of the conflict between the U.S. and Russia escalating on the back of the Syrian crisis, we believe gold should remain well supported, said Carsten Fritsch, commodities analyst at Commerzbank, in a note. Despite the crisis situation, ETF investors are still very hesitant and buying only small quantities of gold, he added.

Read: Geopolitical risk matters againheres what it means for the markets

Meanwhile, worries about a potential global trade war are persisting, as a Chinese government spokesman denied Thursday that recently announced policy changes constitute concessions to the Trump administration in the countries trade skirmish.

The European Central Bank Thursday warned about the risks of a potential trade war to the economy.

As for Thursdays U.S. economic update, weekly jobless claims fell and remain near a 45-year low, while March import prices were held back by oil.

Check out: MarketWatchs Economic Calendar

In other metals trading, May silver
SIK8, -1.60%
shed 1.6%, to $16.505 an ounce.

May copper
HGK8, -1.81%
fell 1.8% at $3.062 a pound, July platinum
PLN8, -0.12%
fell 0.2% to $932.80 an ounce, and June palladium
PAM8, -0.15%
traded at $944.35 an ounce, down 1.7%.

Aluminum prices cooled a bit Thursday, but retained their sharp rise, at 13%, so far this week, driven higher as traders react to U.S. sanctions on Russia and its major aluminum producer.

In exchange-traded funds, the SPDR Gold Shares
GLD, -0.93%
fell 0.9%. The iShares Silver Trust
SLV, -0.96%
fell 0.8%, while the VanEck Vectors Gold Miners
GDX, -0.37%
shed 1%.

Related Topics Metals and Minerals Metal Exchange U.S. Stocks Markets Gold Silver Copper

Quote References GCM8 -18.90 -1.39% DXY +0.23 +0.26% SIK8 -0.27 -1.60% HGK8 -0.06 -1.81% PLN8 -1.10 -0.12% PAM8 -1.40 -0.15% GLD -1.19 -0.93% SLV -0.15 -0.96% GDX -0.08 -0.37% Show all references
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