* Gold retreated from 1-month high on Wednesday
* Gold will vanish as rally begins – Analyst
* Fed may start reducing stimulus by mid-November – minute (recap, adds comment, updates prices)
Oct 14 (Businesshala) – Gold prices tumbled to a one-month high on Thursday as better-than-expected US consumer price data raised bets that the Federal Reserve will tighten its policy more than ever before.
Spot gold fell 0.3% to $1,788.22 an ounce by 0352 GMT on Wednesday after hitting a high of $1,795.81 since Sept. 16. US gold futures slipped 0.3% to $1,789.40.
Jeffrey Haley, a senior market analyst for Asia-Pacific at OANDA, said: “I expect the US dollar and long-dated rates to resume their climb sooner rather than later, and the sooner the gold rally starts, the better.” It will soon disappear.”
“The 100- and 200-day moving averages today lie between $1,795.00 and $1,800.00, and I believe this area will present a formidable barrier to further gains.”
The dollar index held steady after falling 0.5% on Wednesday, while the benchmark US 10-year Treasury yield was steady after retreating from a four-month high.
US consumer prices rose solid in September and are likely to rise further amid rising energy prices. This could put pressure on the Fed to act quickly to normalize policy.
Minutes of the Fed’s September meeting showed that the central bank could start reducing stimulus by mid-November. While a growing number of policymakers were concerned that high inflation could persist longer than thought, they were divided on how quickly they might need to raise rates in response.
Lower central bank incentives and higher interest rates boost government bond yields, which translates into a higher opportunity cost for holding no-interest gold.
“It is still the case that we will see a fall in gold prices as the Fed tightens policy,” said IG Markets analyst Kyle Roda.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% to 982.72 tonnes on Wednesday.
Spot silver was down 0.5% at $22.95 an ounce, platinum was down 0.6% at $1,014.53 and palladium was flat at $2,106.73. (Reporting by Eileen Soreng in Bengaluru; Editing by Amy Karen Daniels and Subhranshu Sahu)