Gold firms on softer dollar as spotlight shifts to Fed; Spot gold hits $1,723.01 per ounce

Gold edged higher on Tuesday, helped by a weaker dollar, but prices were stuck in a tight range as investors refrained from taking big positions ahead of a possible US interest rate hike.

FUNDAMENTALS

* Spot gold was up 0.3% at $1,723.01 per ounce, as of 0104 GMT, while US gold futures were steady at $1,719.80.

* The dollar fell for a fourth straight session, down 0.1% against a basket of major currencies, as investors weighed the implications of a rate hike by the Federal Reserve in an economy that may be on the verge of a recession.

* A weaker dollar makes gold less expensive for buyers holding other currencies.

* The US central bank is widely expected to raise interest rates by 75 basis points at the conclusion of its policy meeting on Wednesday. A hike of that magnitude would effectively close out pandemic-era support for the economy.

* Expectations for a hike of 75 basis points from the Fed stand at about 79%, according to CME’s Fedwatch Tool, with a 23% chance of a 100-bp hike.

* Meanwhile, the European Central Bank may not be done with big interest rate hikes after its initial half-point hike last week, Latvian central bank governor Martins Kazaks said in an interview with Bloomberg News.

* Rising interest rates increase the opportunity cost of holding non-yielding bullion.

* SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.06% to 1,005.29 tonnes on Monday from 1,005.87 tonnes on Friday.

* Spot silver rose 0.3% to $18.46 per ounce, platinum gained 0.6% to $884.50, while palladium edged 0.1% lower to $2,005.89.

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