PRECIOUS-Gold turns lower after knee-jerk rally on Fed minutes – Reuters


* Silver down more than 4 percent after four-day rally

* Gold briefly rallied after Fed’s meeting minutes

(Rewrites throughout, updates prices; adds comment, second
byline, NEW YORK to dateline)

By Marcy Nicholson and Clara Denina

NEW YORK/LONDON, Oct 8 (Reuters) – Gold turned lower on
Thursday in a dramatic turnaround after Federal Reserve meeting
minutes showed policymakers at the U.S. central bank were
unsettled by signs of a global economic slowdown but that their
outlook was not “materially altered”.

Spot gold eased 0.4 percent to $1,139.86 an ounce at
3:16 p.m. EDT (1916 GMT), having rallied 0.5 percent to
$1,151.20 after the September minutes were released.

The Fed thought the economy was close to warranting an
interest rate hike in September but policymakers decided it was
prudent to wait for evidence a global economic slowdown was not
knocking America off course, minutes from the Sept. 16-17
meeting showed.

“Gold’s initial rally above $1,150 and subsequent modest
sell-off reflects a deep ambivalence in the market regarding the
possibility of the December Fed rate hike,” said Tai Wong,
director of base and precious metals trading for BMO Capital
Markets

“At first, gold reacted positively to the September Fed
minutes which indicated that the FOMC would look for ‘further
improvement’ in the labor market, confirming that the outlook
had not ‘deteriorated significantly’ before raising rates.”

A delayed rate rise could support gold in the near term.

U.S. gold futures for December delivery settled
before the minutes were released, down 0.4 percent at $1,144.30
an ounce.

“Our call remains for a December hike, although clearly the
U.S. data has deteriorated since this meeting and so the risks
are that some of those members previously in favor of a hike
this year shift towards a later date for lift-off,” said Andrew
Grantham, senior economist, director, for CIBC Economics, in a
note.

The Fed opted not to hike rates in September in the wake of
cooling global growth and fears of a deepening slowdown in
China.

World stock indexes edged higher after the release of
minutes while the U.S. dollar extended declines and
10-year U.S. Treasury yields rose.

Gold was already trading lower as China returned to the
market after an Oct. 1-7 holiday, when prices had gained $30 an
ounce.

Silver fell as much as 4.4 percent at $15.36 an
ounce, after a four-day rally.

Elsewhere, SPDR Gold Trust, the top gold-backed
exchange-traded fund, said its holdings fell 0.26 percent to
687.20 tonnes on Wednesday.

Platinum was up 0.5 percent at $945.245 an ounce and
palladium fell 0.1 percent to $696.50 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by Adrian Croft and James Dalgleish)