Gold pauses in anticipation of Fed rate increase hints. Tuesday’s gold prices remained within a very small range as investors awaited clues about potential interest rate increases from the U.S. Federal Reserve’s policy meeting.
By 0853 GMT, spot gold had not changed from $1,981.79 per ounce, while U.S. gold futures had decreased by 0.1% to $1,989.80.
Tuesday marks the beginning of the Federal Open Market Committee’s two-day meeting, during which it is largely anticipated that 25 basis points will increase rates.
According to Lukman Otunuga, senior research analyst at FXTM, if the Fed’s speech takes a cautious position, this might weaken the dollar, ultimately driving up gold prices.
Although rates are rising, demand for gold is declining despite the metal’s reputation as a hedge against economic uncertainty.
Despite the U.S. financial crisis, April saw a greater than 1% increase in gold.
“It could be a good idea to keep an eye on the European Central Bank meeting, which is anticipated to end with a 25 basis point rate rise. Any unexpected actions by the central bank might affect the euro, which in turn might affect the dollar and eventually gold,” Otunuga continued.
For owners of other currencies, a declining dollar makes gold more affordable.
On Thursday, the ECB will convene.
In an agreement to settle the worst U.S. bank failure since the 2008 financial crisis, authorities seized and sold First Republic Bank’s (FRC.N) assets to JPMorgan Chase & Co (JPM.N), sending gold temporarily above $2,000 in the process.
“There’s plenty of room for gold investing to rise, boosting prices, while the underlying physical price continues to find strong support from China’s consumer demand and the seemingly unrelenting bid from emerging market central banks,” said Adrian Ash, director of research at BullionVault.
To $24.72 per ounce, silver decreased by 1%.
Palladium increased 0.4% to $1,457.16, while platinum decreased 0.1% to $1,048.75.
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