Investing.com - Gold prices dipped on Wednesday as global demand for safe havens faded amid reduced tensions over Italy’s budget woes. But the precious metal still hit a two-week high before declining and held onto its key $1,200 perch, signaling there were enough investors seeking a hedge to possible inflation from upcoming U.S. rate hikes and strong economic growth.
“We’re looking for higher gold prices soon, but also because strong crude oil prices and worries about crops growing in weather impaired areas spring inflationary winds,” said George Gero, precious metals analyst with the RBC Capital Markets Group in New York.
Gold futures for December delivery on the Comex division of the New York Mercantile Exchange settled down $4.10, or 0.4%. at $1,202.90 per ounce after hitting a Sept. 21 high of $1,212.20.
After struggling over three sessions from a Federal Reserve rate hike on Sept. 26, the market broke on Tuesday, rallying 1.3% to return above the $1,200 level, which is critical to the confidence of gold bugs.
Some gold traders and analysts have expressed surprise at the precious metal’s ability to outperform the dollar of late despite Fed plans for stringent monetary tightening hereon.
Following through with the quarter-percent point it added in September to bring rates to between 2.0% and 2.25%, the Fed indicated it plans another increase in December, three in 2019 and one more in 2020. It has also played down the possibility of undue inflation from these hikes, saying its aim was to “normalize” monetary policy after holding rates near zero for nearly a decade since the financial crisis.
While gold appears well supported, the precious metal still ended the third quarter down nearly 5%. For the year, it is down about 7%.
The U.S. dollar was a touch higher on Wednesday, with the U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, up 0.11% to 95.23.
Earlier Wednesday, data showed that U.S. private sector employers added 230,000 jobs in September, well above economists' expectations and indicating a robust labor market.
December palladium bucked the trend, rising 0.1% to $1,051.50.
Among base metals, December copper gained 1% to $2.832.
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