NEW YORK: Gold extended gains on Tuesday and was on track for its biggest daily rise in a month, as yields dropped on renewed fears of contagion in the US banking sector, ahead of the Federal Reserve’s widely anticipated decision to hike interest rates.

Spot gold jumped 1.8% to its highest since April 14 at $2,017.33 per ounce by 12:18 p.m. EDT (1618 GMT), while US gold futures rose 1.7% to $2,026.70.

“The banking concerns are back... it’s really removing that risk that the Fed was going to possibly be considering a June rate rise,” said Edward Moya, senior market analyst at OANDA.

Shares of US regional lenders extended declines, while Treasury yields fell, as the collapse of First Republic Bank continued to ripple through markets.

Regulators seized First Republic Bank and sold its assets to JPMorgan Chase & Co on Monday, in a deal to resolve the largest US bank failure since the 2008 financial crisis.

The Federal Open Market Committee kicked off its two-day meeting, where it is widely expected to raise rates by 25 basis points.

Markets now priced in 1-in-4 odds of a rate cut in June, seeing no chances of another hike.

Gold has also been supported by some safe-haven demand from resurgent worries over the banking sector’s health and US debt ceiling uncertainty, Bank of China International analyst Xiao Fu said.

US President Joe Biden on Monday summoned four top congressional leaders to the White House next week after Treasury Secretary Janet Yellen warned the government could run short of cash to pay its bills by June.

Spot silver rose 1.6% to $25.38 per ounce, platinum was 1.1% higher at $1,060.84 and palladium fell 0.8% to $1,439.58.