Gold edges lower as dollar firms, but Fed turmoil limits losses

Gold prices edged lower on Wednesday, pressured by an uptick in the dollar, although renewed concerns over the U.S. central bank’s independence after President Donald Trump‘s threat to fire Federal Reserve Governor Lisa Cook lent support to bullion.

FUNDAMENTALS

* Spot gold was down 0.2% at $3,386.19 per ounce, as of 0118 GMT, after hitting its highest level since August 11 on Tuesday.
* U.S. gold futures for December delivery edged 0.1% higher to $3,435.70.
* The dollar index rose 0.1% against its rivals, making gold less attractive for other currency holders.
* Trump said he was removing Cook over alleged improprieties in obtaining mortgage loans, a step that could test the boundaries of presidential power over the U.S. Fed.
* In response, Cook said Trump has no authority to fire her from the central bank, and she will not resign.
* Trump has been pushing the U.S. central bank to cut rates and has repeatedly criticised Fed Chair Jerome Powell for acting too slow.
* Last week, Powell signalled a possible rate cut at the Fed’s meeting next month, citing increasing risks to the U.S. labour market.
* Markets are now pricing in an 87% chance of a quarter-point rate cut at the Fed’s September 17 policy meeting, according to CME FedWatch Tool.
* Non-yielding gold typically performs well in a low-interest-rate environment.
* Focus now shifts to the Personal Consumption Expenditures Price Index, the Fed’s preferred inflation gauge, due on Friday for more cues on U.S. rate cut trajectory.
* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.15% to 959.92 tons on Tuesday from 958.49 tons on Monday.
* Elsewhere, spot silver was flat at $38.59 per ounce, platinum gained 0.3% to $1,353.11 and palladium climbed 0.8% to $1,102.50.