Gold muted before Fed meeting as inflation jitters boost allure

Bengaluru — Gold prices were little changed on Monday, as investors awaited the US Federal Reserve's meeting for clues on its interest rate hikes, while concerns over inflation and Russia-Ukraine discord kept bullion's safe-haven allure intact.

Spot gold was flat at $1,836.21 per ounce by 6.03am. US gold futures were up 0.3% to $1,836.80.

Investors sought cover from worries about a possible extension of US sanctions or new EU measures if Russia attacks Ukraine, “but [gold and silver] face headwinds from [federal open market committee] expectations,” Phillip Futures analyst Avtar Sandu said in a note.

The Fed will tighten monetary policy at a much faster pace than thought a month ago to tame persistently high inflation, now viewed by economists as the biggest threat to the US economy over the coming year.

The US central bank's federal open market committee (FOMC) is scheduled to meet on January 25-26.

Gold is generally seen as an inflationary hedge, but it is highly sensitive to rising US interest rates, which increases the opportunity cost of holding non-interest bearing bullion.

Benchmark US 10-year Treasury yields fell on Friday, reducing the opportunity cost of holding non-interest bearing bullion.

Russia will face severe economic sanctions if it installs a puppet regime in Ukraine, a senior British minister said on Sunday after the UK accused the Kremlin of seeking to install a pro-Russian leader there.

Spot gold may retest a resistance at $1,850 per ounce, a break above which could lead to a gain to $1,860-$1,872 range, according to Reuters's technical analyst Wang Tao.

Spot silver shed 0.3% to $24.15 an ounce. Palladium rose 0.8% to $2,124.21 and platinum was up 0.4% to $1,032.80.

Reuters