NEW YORK: Gold prices were hemmed into a tight range on Wednesday with investors focused on the outcome of the US Federal Reserve’s policy meeting for signals on its rate hike plans.
Spot gold rose 0.1% to $1,718.91 per ounce by 1607 GMT. US gold futures were little changed at $1,717.00.
Despite gold’s status as an inflation hedge, bullion’s shine dims amid rising interest rates as it is a non-interest yielding asset.
“If the Fed hikes rates by 100 bps (basis points), this might reduce demand for precious metals. But if they stick to a 75 bps hike, then there is chance that gold could see a relief rally,” said Jim Wyckoff, senior analyst at Kitco Metals.
With the Fed expected to hike its key interest rate by three-quarters of a percentage point on Wednesday, focus will shift to how deeply signs of an economic slowdown have registered with its policymakers.
“Given the market is priced for a 75 bps hike at this meeting, the focus will be on whether the September meeting will see the pace of hikes slow,” TD Securities said in a note.
Gold has lost more than $300 since climbing past the $2,000-per-ounce level in early March due to the Fed’s aggressive rate increases and the dollar’s recent rally, overshadowing bullion’s appeal as a safe-haven despite recession risks.
Indicative of market sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), touched their lowest since January, to about 32,321,124 ounces.
“Exit from the ETFs maybe because investors are rethinking as paper assets tend not to perform so well during inflationary times. And one can argue that ETFs are paper assets. If gold prices start to rebound, we might see inflows into ETFs,” Wyckoff added.
Spot silver rose 0.2% to $18.64 per ounce, platinum added 1.1% to $882.95, while palladium gained 0.4% to $2,018.18.
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