Gold unchanged ahead of Fed’s rate decision

Bengaluru — Gold prices were flat on Wednesday as investors weighed the chance of an outsize interest rate cut by the Federal Reserve later in the day.

Spot gold was little changed at $2,571.28/oz by 2.24am GMT. Bullion rose to a record high of $2,589.59 on Monday. US gold futures rose 0.2% to $2,597.60.

The Fed is expected to announce a cut to interest rates for the first time in more than four years at 6pm GMT. Chair Jerome Powell will hold a press conference afterward.

Markets are now pricing in a 65% chance of a 50 basis point (bp) rate cut, compared with 34% a week earlier, according to the CME FedWatch tool.

“I think there’s a real risk that market pricing is too dovish, and that the Fed won’t deliver a dovish 50bp cut. And, that could see yields and the dollar rip higher and weigh further on gold,” City Index senior analyst Matt Simpson said.

“But, let’s not lose sight of the established bullish trend and bullish market positioning, and dips towards the lows around $2,500 are likely to appeal to bears.”

Zero-yield bullion tends to be a preferred investment in a lower interest rate environment and during geopolitical turmoil.

Meanwhile, data released on Tuesday showed that US retail sales unexpectedly rose 0.1% in August, suggesting that the economy remained on solid footing through much of the third quarter.

In the Middle East, militant group Hezbollah promised to retaliate against Israel, accusing it of triggering explosions in Lebanon on Tuesday that killed nine and injured nearly 3,000.

On the physical front, India’s August gold imports stood at $10.06bn, compared with $3.13bn in July, according to the trade ministry.

Among other metals, spot silver fell nearly 1% to $30.42/oz, platinum edged 0.2% lower to $979.85 and palladium shed 0.6% to $1,109.42.

Reuters