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Oct 13 (Businesshala) – Gold rose more than 1% on Wednesday as the dollar and U.S. Treasury yields fell, with investors turning to the minutes of the Federal Reserve’s latest policy meeting to confirm its tapering strategy.
As of 10:21 a.m. EDT (1421 GMT), spot gold was up 1.6% at a four-week high of $1,788.01 an ounce. US gold futures jumped 1.6% to $1,786.60.
Spot silver, along with other precious metals, rose 2.3% to $23.05 an ounce, platinum rose 2% to $1,027.09 and palladium rose 4.7% to $2,142.30.
“Gold is currently following the yield. The initial reaction was a major uptick in yields after the CPI (Consumer Price Index) data is now starting to fade,” said Daniel Pavillonis, senior market strategist at RJO Futures.
Gold opened gains as benchmark US 10-year Treasury yields jumped more than 1.6% after a solid rise in US consumer prices in September and data leading to further increases in the coming months.
But a subsequent fall in yields, which lowered the opportunity cost of holding interest-free gold, fueled a strong rally in the precious metals.
“This is a situation where gold is an inflationary metal, which should go up, but the initial rate shock limited its upside potential,” Pavilonis said.
The metal was also supported by a fall in the dollar and concerns that higher inflation would affect global economic growth.
“Given how the stagflation bearish conversation is impacting global sentiment and promoting risk aversion, this could support the gold bug,” said FXTM analyst Lukman Otunuga.
Investors are now awaiting the release of minutes from the US central bank’s September meeting at 1800 GMT, amid hopes of economic aid tapering off as soon as next month.
Meanwhile, a group of banks, which partnered with the London Metal Exchange to launch gold and silver futures in 2017, are preparing to abandon the project after volumes were not as expected. (Reporting by Brijesh Patel in Bengaluru; Editing by Aditya Soni)