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Gold Dips In Asia As Fed Views Point To Steady Path On Rates In 2018

Gold dips in Asia - Gold dipped in Asia on Thursday with the latest minutes weighing as they expressed optimism about the economy and concern about financial markets, hinting at a steady rate hike view for 2018.

Gold futures for December delivery on the Comex division of the New York Mercantile Exchange fell 0.18% to $1,289.91 a troy ounce.

Federal Reserve officials expressed largely optimistic views of economic growth at their most recent meeting but also started to worry that market prices are getting out of hand and posing a danger to the economy.

Minutes from the November Federal Open Market Committee meeting indicated solid views on growth – the labor market, consumer spending and manufacturing all were showing solid gains. While there were disagreements on the pace of inflation, sentiment otherwise was largely positive.

“In their discussion of the economic situation and the outlook, meeting participants agreed that information received since the FOMC met in September indicated that the labor market had continued to strengthen and that economic activity had been rising at a solid rate despite hurricane-related disruptions,” the minutes stated.

However, when it came to evaluating market conditions, the talk took a more cautious tone.

“In light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances,” the minutes stated. “They worried that a sharp reversal in asset prices could have damaging effects on the economy.”

Overnight, gold prices rose on Wednesday after a slump in Treasury yields pressured the dollar.

Rising fears that the treasury curve is edging closer to inversion – the yields on bonds with a shorter duration are higher than the yields on bonds that have a longer duration – sparked concerns over the long-term growth of the economy, raising demand for safe-haven gold.

The ongoing yield curve flattening comes as data showed durable goods orders for October fell short of expectations, denting expectations somewhat that the U.S. economy is on track for a bullish final quarter of the year.

The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.5% last month after an upwardly revised 2.1% increase in September.

Gold is sensitive to moves lower in the U.S. dollar – A weaker dollar makes gold cheaper for holders of foreign currency, which increases demand for the precious metal.

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