* Higher interest rates boost opportunity cost of holding
* Goldman Sachs sees higher rates weighing on gold
(Recasts with Fed minutes; updates prices; adds comment, second
byline, NEW YORK dateline)
By Marcy Nicholson and Eric Onstad
NEW YORK/LONDON, Feb 22 Gold turned higher as
the dollar shifted lower on Wednesday, after minutes from the
last U.S. Federal Reserve meeting showed uncertainty among
policymakers about the new Trump administration's economic
Still, many Fed policymakers said it may be appropriate to
raise interest rates "fairly soon" should jobs and inflation
data come in line with expectations, minutes of their Jan.
31-Feb. 1 policy meeting showed.
Spot gold was up 0.1 percent at $1,237.48 an ounce by
2:56 p.m. EST (1956 GMT), while U.S. gold futures
settled down 0.5 percent at $1,233.30, prior to the release of
The U.S. dollar , which was boosted by hawkish
comments from various Fed officials in the previous session,
turned lower after the minutes were released.
"Gold rallied after the January Fed minutes suggested that
voting members were relaxed about having 'ample' time to respond
to inflation pressure," said Tai Wong, director of base and
precious metals trading for BMO Capital Markets in New York.
"It remains to be seen if their sanguine outlook has given
the recently tentative gold bull the testosterone shot it needs
to break decisively higher."
Gold is highly sensitive to rising U.S. interest rates,
which increase the opportunity cost of holding non-yielding
bullion, while also boosting the dollar.
"Our economists expect three rate hikes in 2017 and see the
probability of a rate hike by June at 80 percent, and we see
U.S. long-dated real rates rising slightly, placing downward
pressure on gold," Goldman Sachs said in a note.
On Tuesday, Philadelphia Fed President Patrick Harker
suggested he would support an interest rate increase at the U.S.
central bank's mid-March policy meeting as long as inflation,
output and other data continue to show the U.S. economy is
"The key thing is that geopolitics and inflation have nudged
themselves to the top of the queue as the key drivers of gold,"
said Ross Norman, chief executive officer of Sharps Pixley,
prior to release of the minutes.
Investors were also looking ahead to an address by U.S.
President Donald Trump to Congress next week at which he is
expected to announce tax policies.
Spot silver rose 0.6 percent at $18.04 an ounce, and
platinum rose 0.3 percent at $1,002.45. Palladium
dropped 1.6 percent to $766.75.
"Strength in palladium is still remarkable given that car
sales have been somewhat weak in January, especially in China,"
said Carsten Menke, commodities research analyst at Julius Baer
"I'd say that palladium prices and sentiment should come
under pressure once we get more evidence that China is indeed
(Additional reporting by Nallur Sethuraman in Bengaluru and Jan
Harvey in London; Editing by Susan Thomas and Leslie Adler)