Gold steady after rally as traders look to Federal Reserve meet

Gold held gains after bouncing back above $1 700 an ounce, spurred by a falling dollar as traders examined the latest Federal Reserve comments for indications on the magnitude of its forthcoming interest-rate hikes.

Bullion on Wednesday rallied 1% after dipping below $1 700 — a threshold rarely breached since the start of the pandemic in 2020. A guage of the greenback’s strength has fallen from its all-time high.

Support for the precious metal came even as interest rate increases looked set to continue in most major economies, apart from China.

US Federal Reserve Vice Chair Lail Brainard said Wednesday monetary policy would “need to be restrictive for some time” in order to tame inflation. The central bank will meet on September 20-21, with a three-quarter point interest rate hike widely predicted.

“Gold’s demand due to its safe-haven attribute is valid, although the focus of investors has been glossed over by strength in the dollar and US Treasury yields, which have weighed heavily on gold prices over the past month,” said Avtar Sandu, senior manager of commodities at Phillip Nova. Strong US economic data and hawkish signals from the Fed drove up expectations of more sharp interest rate hikes, he said.

Spot gold was steady at $1 717.59 an ounce at 7:08 a.m. in London, up from a low of $1 691.50 a day earlier. The Bloomberg Dollar Spot Index was little changed. Silver rose, while platinum and palladium fell.

© 2022 Bloomberg

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