WASHINGTON (dpa-AFX) - Gold prices climbed to near two-week high on Wednesday, as the dollar fell ahead of the release of the minutes of the Federal Reserve's most recent monetary policy meeting.
The dollar index, which fell to 105.05 around mid morning, recovered some lost ground subsequently, but at 105.35, still remains well below (down 0.35%) from the previous close.
The dollar shed ground as investors reacted to dovish comments from Federal Reserve Chair Jerome Powell.
On Tuesday, Powell acknowledged progress in disinflation but added that officials need more confidence before cutting interest rates.
Powell said at the ECB Forum in Portugal that policy makers want to understand whether recent weaker inflation readings indicate a true picture of underlying price pressures.
Amid rising concerns about the outlook for economic growth, it is widely accepted that the Fed will likely cut interest rates at its meeting in September.
Gold futures for July ended higher by $36.80 or about 1.58% at $2,359.80 an ounce.
Silver futures for July, gaining for a fifth straight session, ended at $30.548 an ounce, up $1.195 or about 4.1%.
Copper futures for September climbed to $4.5295, gaining $0.1105 or about 2.5%.
A report released by the Institute for Supply Management showed an unexpected contraction by U.S. service sector activity in the month of June.
The ISM said its services PMI slid to 48.8 in June from 53.8 in May, with a reading below 50 indicating contraction. Economists had expected the index to edge down to 52.5.
On the inflation front, the prices index dipped to 56.3 in June from 58.1 in June, indicating a modest slowdown in the pace of price growth.
'The Fed is unlikely to feel comfortable enough with progress on the inflation front to cut rates at the July decision,' said Bill Adams, Chief Economist for Comerica Bank. 'Even so, odds of a rate cut at the following decision in September are higher in light of June's weak ISM PMIs and rising jobless claims.'
A report from the Labor Department showed initial jobless claims rose to 238,000 in the week ended June 29th, an increase of 4,000 from the previous week's revised level of 234,000. Economists had expected jobless claims to inch up to 235,000 from the 233,000 originally reported for the previous week.
Payroll processor ADP also released a report showing private sector employment in the U.S. increased by slightly less than expected in the month of June.
ADP said private sector employment climbed by 150,000 jobs in June after rising by an upwardly revised 157,000 jobs in May.
Economists had expected private sector employment to increase by 160,000 jobs compared to the addition of 152,000 jobs originally reported for the previous month.
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