Gold edges lower steady ahead of Fed policy statement
Gold has eased after data showed US inflation rose last month, potentially keeping the Federal Reserve on course to raise interest rates this year, but moves were muted ahead of a pending US central bank policy statement.
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In a statement, the US central bank is expected to signal policymakers’ willingness, or otherwise, to proceed with the rate hiking process they kicked off in December.
Since then, volatility in equities and oil prices, a raft of mixed economic data, and concerns over global growth have curbed expectations for further hikes, allowing gold to rise 16 per cent this year.
It peaked at US$1,282.51 an ounce on Friday, but struggled to maintain gains as traders awaited further clues from the Fed.
Spot gold price
Spot gold was down 0.1per cent at US$1 230.49 an ounce while US gold futures for April delivery were down 70 cents an ounce at US$1,230.30.
“Currently it is all about the Fed,” Ava Trade analyst, Naeem Aslam said. “We are anticipating a very hawkish message from them.”
Gold is highly sensitive to the prospect of rising rates, which lifts the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced.
“What we are focused on right now is the feared trajectory of the dollar, which looks very bullish,” Aslam said. “This is not such good news for gold.”
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Fed policymakers
Fed policymakers are expected to leave short-term interest rates unchanged but also to signal that a rate hike is not too far off as long as the job market and inflation continue to improve.
The dollar rose against a basket of currencies as investors positioned for fresh guidance from the bank. Any signal that there is more than one rate hike in store this year will likely lift the greenback further.
“Key to the policy outlook will be the FOMC’s assessment of the outlook for inflation,” HSBC said in a note. “If the committee drops its expectation of ‘low’ inflation in the near term, it would be a signal that the policymakers no longer see too low inflation as a barrier to a rate hike.”
The world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, said its holdings rose 2.1 tonnes on last Tuesday, after the fund reported its biggest one-day outflow since early December.
Silver was up 0. per cent at US$15. an ounce, while platinum was up 1.2 per cent at US$966.70 an ounce and palladium was up 0.1 per cent at US$565.25 an ounce.