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Gold slips as dollar gains after Fed warning on inflation fight

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Gold on Monday fell after two sessions of gains, as the dollar rose after Federal Reserve Governor Christopher Waller warned markets that the central bank was not softening its fight against inflation.

Spot gold fell 0.6% to $1,760.49 per ounce by 0903 GMT. U.S. gold futures eased 0.3% to $1,763.50.

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Bullion had posted its best weekly gain since March 2020 last week on hopes of slower rate hikes after data showed price pressure cooling in the United States.

“Expect lower gold prices going into year-end, with Fed officials reiterating that further interest rate hike are needed to bring inflation under control and one swallow (lower CPI) doesn’t make a summer (end of Fed hikes),” UBS analyst Giovanni Staunovo said.

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“This likely will support the U.S. dollar as well and be another headwind for gold. (And) if these factors materialize, I would expect the other precious metals to suffer as well near-term,” Staunovo added.

Spot silver retreated from a five-month peak, last down 0.2% to $21.63 per ounce on the day. Platinum fell 1% to $1,018.65, and palladium edged 0.4% lower to $2,030.13.

The dollar index rose 0.4%, making gold more expensive for other currency holders.

Fed’s Waller said on Sunday the Fed might consider slowing the pace of rate increases at its next meeting but that should not be seen as a “softening” of its battle against inflation.

While gold is considered a hedge against inflation, rising rates tend to dull bullion’s appeal as it pays no interest.

Meanwhile, U.S. consumer sentiment fell in November, pulled down by persistent worries about inflation and higher borrowing costs, a survey showed on Friday.

“Volatility is here to stay as make no mistake inflation remains at the fulcrum,” said Stephen Innes, managing partner, SPI Asset Management. (Reporting by Arundhati Sarkar and Brijesh Patel in Bengaluru; editing by Uttaresh.V)

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