Gold unchanged as traders await clues on Fed’s rate plans

Bengaluru — Gold was flat on Tuesday as investors await fresh insights on the Federal Reserve’s stance on US interest rate reductions for further direction on bullion prices.

Spot gold held its ground at $2,646.64/oz by 3.19am GMT. Prices hit a record high of $2,685.42 last month. US gold futures edged 0.1% lower to $2,663.10.

“Gold prices have been surprisingly resilient, refusing to succumb to a stronger US dollar and higher treasury yields,” IG market strategist Yeap Jun Rong said.

US elections could increase gold demand as a hedge against uncertainty, while expected Fed rate cuts, probably in 25 basis point (bp) increments, could push prices to a record high, targeting $2,800 by the year-end, he said.

The dollar climbed to a more than two-month peak in the previous session, making bullion more expensive for other currency holders. The benchmark 10-year yield also ticked higher.

Fed governor Christopher Waller called for “more caution” on interest rate cuts ahead. While, Fed Bank of Minneapolis president Neel Kashkari said more rate reductions probably lay ahead for the US central bank as the 2% inflation target loomed into sight.

As per the CME FedWatch tool, markets see an 87% chance of a 25bp rate reduction in November. Lower interest rates raise the appeal of holding zero-yield bullion.

Investors will keep an eye on US retail sales, industrial production data and weekly jobless claims due later in the week.

Central banks remained keen buyers of gold to diversify their reserves for financial or strategic reasons, representatives of three central banks told the London Bullion Market Association’s annual conference.

Spot silver was flat at $31.14/oz. Platinum fell 0.3% to $989.95 and palladium slipped nearly 1% to $1,020.50.

Elsewhere, China could raise an additional $850bn from special treasury bonds over three years to help bolster a sagging economy through expanded fiscal stimulus, Caixin Global reported.

Reuters