Gold bars are displayed at GoldSilver Central’s office in Singapore. Picture: REUTERS
Gold bars are displayed at GoldSilver Central’s office in Singapore. Picture: REUTERS

Bengaluru — Gold prices were little changed on Thursday after declining up to 1% in the previous session as lack of clarity on the US Federal Reserve’s future monetary policy easing kept markets cautious.

The Fed lowered interest rates for a second time in 2019 in a 7-3 vote on Wednesday but signalled further cuts are unlikely as the labour market remains strong.

The cut was widely expected, but the split vote has raised some concern about predicting the future path of monetary policy.

“Traders are disappointed by the divergence of the future rate cut path and the market is unwinding expectations of a few more cuts in the months to come,” said Margaret Yang Yan, a market analyst at CMC Markets.

“People are looking to take profit and lock gains. There is a need for price consolidation before gold prices pick up.”

Spot gold was barely changed at $1,494.05/oz as of 4am GMT, after a 0.6% drop on Wednesday. However, US gold futures were down 1% at $1,501.40/oz.

Central banks globally are facing increasing pressure to dole out monetary support for flagging economies as the US-China trade dispute hits global economic growth.

Lower interest rates reduce the opportunity cost of holding non-yielding gold, and weighs on the dollar.

“Gold looks vulnerable. If the Fed is right to proceed with caution — meaning the global environment is not as dire as stimulus-hungry markets seem to envision — that implies less scope for overall easing,” said Ilya Spivak, a senior currency strategist at DailyFx.

A close below $1,480 would set the stage for a retest of the $1,400 level initially and may then pave the way for a deeper pullback, he said.

Meanwhile, the Bank of Japan kept monetary policy steady but said it would re-examine economic and price developments more thoroughly at its next policy meeting, amid growing risks to the country’s fragile economic recovery.

Spot gold is poised to break a support at $1,488/oz and fall to the next support at $1,446, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver dropped 0.3% to $17.68/oz, and platinum slipped 0.2% to $928.73. Palladium was unchanged at $1,591.19/oz. 

Reuters