Due to a stronger dollar and a still-high consumer prices report, gold prices fell in range-bound trading on Wednesday. Investors are assessing the U.S. Federal Reserve’s rate-hike trajectory.
Gold traded in a $6 range at $1,900.06 per ounce at 0540 GMT, down 0.1%. Earlier, prices temporarily dropped below $1,900.
U.S. gold futures declined 0.3% to $1,904.70.
“Some degree of relative quiet on U.S. banks and an overnight rise in Treasury yields may temporarily weaken demand for safe haven proxies” like gold, said OCBC FX strategist Christopher Wong.
When U.S. Treasury yields rose, the dollar index rose 0.1%, making bullion more expensive for foreign buyers.
“As the attention switches to the Federal Open Market Committee meeting next week, the issue remains what guidance and how dots plot will evolve taking into consideration the recent development with some U.S. banks vs combatting inflation,”
While a government report showing strong U.S. inflation in February and concerns of a long-term financial crisis faded, the Federal Reserve is poised to hike its benchmark rate by 25 basis points next week and again in May.
After rising 0.5% in January, the U.S. CPI increased 0.4% last month. CPI rose 6% from February to February.
When interest rates rise to fight inflation, the opportunity cost of owning the non-yielding asset, gold, rises, Wong said.
“Investor allocation to gold remains modest,” ANZ analysts wrote, but they expect the banking turbulence to “reinvigorate investor demand over the medium run.”
Silver increased 0.2% to $21.73, platinum 0.1% to $983.42, and palladium 0.6% to $1,497.85.
Comment Template