December 17, 2015 / 12:50 AM / 2 years ago

PRECIOUS-Gold dips in choppy trade after Fed rate hike

By A. Ananthalakshmi
    SINGAPORE, Dec 17 (Reuters) - Gold slipped on Thursday,
giving back some of its overnight gains, in choppy trading after
the Federal Reserve raised U.S. interest rates for the first
time in nearly a decade.
    The U.S. central bank's policy-setting committee raised the
range of its benchmark interest rate by a quarter of a
percentage point, ending a lengthy debate about whether the
economy was strong enough to withstand higher borrowing costs.
    Gold has slumped nearly 10 percent this year, largely on
uncertainty around the timing of the U.S. rate hike and on fears
that higher rates would hit demand for the non-interest-paying
precious metal.
    Though the Fed decision removes an overhang for gold prices,
the focus now shifts to the central bank's pace of future rate
increases. 
    Spot gold dipped 0.2 percent to $1,070.70 an ounce by
0037 GMT. The metal had rallied before the Fed decision on
Wednesday and managed to hold on to most gains post the central
bank statement, ending the day up 1.2 percent.
    U.S. gold fell 0.6 percent to $1,070.50, following a
1.4 gain in the previous session.
    "Gold has been extraordinarily sensitive to perceived
changes in monetary policy for many months," said HSBC analyst
James Steel. "The rate rise may finally clear the deck and
remove rate-related uncertainty from the bullion market."
    The Fed action leaves gold positioned for some gains,
largely from short covering, but only modestly, he said.
    Investors had increased their short positions on gold to
record levels this month, although they have since edged back
from that peak. 
    The dollar jumped nearly 1 percent against a basket of major
currencies on Thursday, a factor that could limit any short
covering gains. 
    The U.S. central bank made clear the rate hike was a
tentative beginning to a "gradual" tightening cycle, and that in
deciding its next move it would put a premium on monitoring
inflation, which remains mired below target. 
    Wall Street's top banks expect the Fed to next raise U.S.
rates in the first quarter of next year, according to a Reuters
poll. 
    The rate forecasts, or dot points, from Fed members were a
little higher than many expected with 100 basis points of hikes
pencilled in for next year and a terminal rate of 3.5 percent.
    The divergence between the Fed forecasts and the market
could hurt gold prices as investors begin to align their views
with the central bank.

    PRICES AT 0037 GMT    
 Metal            Last     Change   Pct chg
                                           
 Spot gold         1070.7    -1.86    -0.17
 Spot silver        14.11   -0.064    -0.45
 Spot platinum     877.05     3.95     0.45
 Spot palladium    564.15     -4.3    -0.76
 Comex gold        1070.5     -6.3    -0.59
 Comex silver       14.11   -0.138    -0.97
                                           
 COMEX gold and silver contracts show the
 most active months
 
    

 (Reporting by A. Ananthalakshmi; Editing by Ed Davies)

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