Gold holds above $2,000 ahead of Fed rate decision

Bengaluru — Gold prices held steady above the key $2,000/oz level on Wednesday, while investors turned their attention to the US Federal Reserve’s interest rate decision due later in the day.

Spot gold held its ground at $2,017.54/oz by 3.35am GMT after rising more than 1% in the previous session, as yields dropped on the renewed fear of contagion in the US banking sector.

US gold futures were up 0.2% at $2,026.50/oz.

The Fed’s rate decision will be announced at 6pm GMT. Investors mostly expect the US central bank to raise interest rates by 25 basis points (bps), but are looking for clues on its next steps.

“If the Fed were to surprise with a pause, this would suggest a deepening banking crisis and would likely send gold higher,” said Clifford Bennett, chief economist at ACY Securities.

Bullion is known as a hedge against inflation and economic turbulence, but higher rates tend to dent zero-yielding asset’s appeal.

Data on Tuesday showed that US job openings dropped in March and layoffs increased to the highest level in more than two years, suggesting some softening in the labour market.

If uncertainties about the banking crisis and concerns over a potential US debt default persist, dollar will loose its shine and more light will fall on gold, Bennett said.

Top US Senate Republicans on Tuesday called on President Joe Biden to accept their party’s debt-ceiling package or make a counter-offer, while a top Democrat said the Senate might try to advance a “clean” debt-ceiling hike next week.

On the physical front, Perth Mint’s April gold product sales slipped more than 6% month on month, while silver sales hit a six-month peak.

Spot silver dipped 0.3% at $25.32/oz.

Platinum fell 0.5% to $1,060.16, while palladium gained 0.6% to $1,437.33.

Analysts have cut their forecasts for palladium after a 60% price fall, but rising vehicle production should limit any sell-off, a Reuters poll showed.

Reuters