Gold prices hovered in a limited range on Wednesday as some investors waited for the U.S. Federal Reserve’s interest rate decision and policy outlook.
Gold was unchanged at $1,940.11 per ounce at 0540 GMT after falling 2% on Tuesday. Gold futures rose 0.1% to $1,942.10.
“Market developments are volatile, but banking sector wounds appear to be healing after emergency backstops and government promises.
As safe-haven demand declines, gold has fallen “Christopher Wong, OCBC FX strategist.
With Silicon Valley Bank’s failure and Credit Suisse’s turmoil, gold rose 10%, or $180, to a one-year high on safe-haven demand. Notwithstanding financial system fears, prices fell after Credit Suisse’s bailout increased risk appetite.
“If smaller institutions suffer deposit runs that raise the danger of contagion,” Treasury Secretary Janet Yellen warned bankers on Tuesday.
Investors watch the Fed’s 1800 GMT decision and Jerome Powell’s press conference. CME FedWatch predicts a 25-basis-point rate hike by the Fed.
“If we have higher dots plot, then it implies a still-hawkish Fed that is determined to battle inflation… a potential hawkish repricing might damage gold prices,” OCBC’s Wong said.
Inflation-fighting interest rate hikes raise the opportunity cost of owning non-yielding gold, a hedge against inflation.
Reuters technical analyst Wang Tao said gold might recover from $1,951 to $1,958 per ounce after stabilizing around $1,934.
Platinum increased 0.5% to $973.30, while palladium rose 1.6% to $1,410.76.
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