Gold trades flat as investors await Fed rate direction
Bullion’s rally takes a pause as the banking sector shows signs of recovery and risk appetite returns
22 March 2023 - 07:24
byKavya Guduru
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Bengaluru — Gold prices traded in a narrow range on Wednesday as some investors stayed on the sidelines ahead of the US Federal Reserve’s interest rate decision and policy outlook.
Spot gold was flat at $1,939.59 per ounce at 3.18am GMT, after dropping 2% on Tuesday. US gold futures edged 0.1% higher at $1,943.50.
“Market developments remain fluid, but as it stands, it does appear that banking sector wounds are showing tentative signs of recovery after the emergency backstops and assurances from authorities ... gold has eased lower as safe-haven demand dissipates,” said OCBC FX strategist Christopher Wong.
Bullion recently rallied as much as 10%, or by about $180, to a one-year high on safe-haven demand after the collapse of US-based Silicon Valley Bank (SVB) and a crisis at lender Credit Suisse. But prices retreated after the rescue of Credit Suisse whetted risk appetite, though financial system uncertainties remained.
US treasury secretary Janet Yellen told bankers on Tuesday the US banking system was stabilising, but further steps might be needed “if smaller institutions suffer deposit runs that pose the risk of contagion”.
Investor attention is now on the Fed’s decision scheduled at 6pm GMT, followed by a press conference by Fed chair Jerome Powell. The US central bank is widely expected to increase rates by 25 basis points (bps), according to the CME FedWatch tool.
“Key focus is on how the Fed communicates its forward guidance, in particular ‘the higher for longer’ rhetoric and dots plots,” OCBC’s Wong said.
“If we do get higher dots plot, then that represents a still-hawkish Fed that is determined to fight inflation ... a potential hawkish repricing could undermine gold prices.”
Bullion is seen as a hedge against inflation, but the opportunity cost of holding non-yielding gold rises when interest rates are increased to bring down inflation.
Spot silver eased 0.1% to $22.36 per ounce, platinum firmed 0.4% at $972.10 and palladium rose 0.8% to $1,399.59.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Gold trades flat as investors await Fed rate direction
Bullion’s rally takes a pause as the banking sector shows signs of recovery and risk appetite returns
Bengaluru — Gold prices traded in a narrow range on Wednesday as some investors stayed on the sidelines ahead of the US Federal Reserve’s interest rate decision and policy outlook.
Spot gold was flat at $1,939.59 per ounce at 3.18am GMT, after dropping 2% on Tuesday. US gold futures edged 0.1% higher at $1,943.50.
“Market developments remain fluid, but as it stands, it does appear that banking sector wounds are showing tentative signs of recovery after the emergency backstops and assurances from authorities ... gold has eased lower as safe-haven demand dissipates,” said OCBC FX strategist Christopher Wong.
Bullion recently rallied as much as 10%, or by about $180, to a one-year high on safe-haven demand after the collapse of US-based Silicon Valley Bank (SVB) and a crisis at lender Credit Suisse. But prices retreated after the rescue of Credit Suisse whetted risk appetite, though financial system uncertainties remained.
US treasury secretary Janet Yellen told bankers on Tuesday the US banking system was stabilising, but further steps might be needed “if smaller institutions suffer deposit runs that pose the risk of contagion”.
Investor attention is now on the Fed’s decision scheduled at 6pm GMT, followed by a press conference by Fed chair Jerome Powell. The US central bank is widely expected to increase rates by 25 basis points (bps), according to the CME FedWatch tool.
“Key focus is on how the Fed communicates its forward guidance, in particular ‘the higher for longer’ rhetoric and dots plots,” OCBC’s Wong said.
“If we do get higher dots plot, then that represents a still-hawkish Fed that is determined to fight inflation ... a potential hawkish repricing could undermine gold prices.”
Bullion is seen as a hedge against inflation, but the opportunity cost of holding non-yielding gold rises when interest rates are increased to bring down inflation.
Spot silver eased 0.1% to $22.36 per ounce, platinum firmed 0.4% at $972.10 and palladium rose 0.8% to $1,399.59.
Reuters
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