PRECIOUS-Gold trims gains after Powell's comments on inflation

Reuters

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 (Updates prices)
    * Gold up over 1% this week 
    * Powell expects inflation to abate next year
    * Silver hits 1-1/2-month high

    By Amy Caren Daniel
    Oct 22 (Reuters) - Gold prices more than halved their
session gains on Friday after U.S. Federal Reserve Chair Jerome
Powell said he expected inflation to ease next year and that the
U.S. central bank was on track to begin winding down its
stimulus.  
    Spot gold  XAU=  was up 0.6% at $1,793.82 per ounce by 1:41
p.m. ET (1741 GMT), after rising as much as 1.7% earlier in the
session. Prices have risen 1.4% for the week.
    U.S. gold futures  GCv1  settled up 0.8% at $1,795.80 per
ounce.
    "Clearly, the pullback was in regards to comments from the
Fed Chairman with regards to how he expects inflation to
potentially remain elevated well into next year," said David
Meger, director of metals trading at High Ridge Futures.
    "However, that is a double-edged sword. The inflationary
pressures remaining in the market will be an underlying
supportive factor for gold and silver in the weeks and months
ahead."
    Powell said the U.S. central bank should begin reducing its
asset purchases soon, but should not yet raise interest rates
because employment was still too low.  urn:newsml:reuters.com:*:nL1N2RI1MV
    The dollar index  .DXY  pared losses after Powell's
comments.
    "Inflation is the one thing that everybody is talking about
today," said Daniel Pavilonis, senior market strategist at RJO
Futures.
    "The perception is that the Federal Reserve is behind the
curve, and the metals market is looking at that as the Fed is
not going to do enough to slow inflation ... that is where gold
is going to find its value."
    While gold is often considered an inflation hedge, reduced
stimulus and interest rate hikes push government bond yields up,
raising the opportunity cost of holding non-yielding bullion.
    Euro zone inflation expectations hit their highest levels in
years, putting additional pressure on the European Central Bank
and its insistence on maintaining crisis-era stimulus.
 urn:newsml:reuters.com:*:nL8N2RI1NT
    Silver  XAG=  rose 0.8% to $24.34 per ounce.
    Platinum  XPT=  fell 0.7% to $1,041.52 and palladium  XPD= 
rose 0.6% to $2,029.18 per ounce. 

 (Reporting by Amy Caren Daniel in Bengaluru; Editing by
Shailesh Kuber and Ramakrishnan M.)
 ((Amy.CarenDaniel@thomsonreuters.com; +91 7204334020;))

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