Gold prices flat on caution ahead of Fed policy meet

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Gold prices traded in a tight range on

Tuesday, as cautious investors focused on the Federal Reserve’s

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policy decision this week where the U.S. central bank is

expected to hike rates aggressively in an effort to curb

inflation.

Spot gold held its ground at $1,676.12 per ounce, as

of 0406 GMT.

U.S. gold futures rose 0.4% at $1,685.50.

The Fed, at the conclusion of its two-day policy meeting on

Wednesday, is expected to raise interest rates by 75 basis

points (bps), with market participants even seeing a 19% chance

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for a 100 bps increase.

“Higher Treasury yields and a stronger dollar on the back of

expectations for more aggressive Fed’s policies have been

headwinds for gold prices,” IG market strategist Yeap Jun Rong

said.

“More aggressive projections from policymakers compared to

current market expectations could reveal a higher-for-longer

stance for rates, which may not be well-received by gold

prices.”

Rising interest rates dent gold’s appeal, as they increase

the opportunity cost of holding non-yielding bullion.

Even though the dollar index dipped 0.2%, it wasn’t

far from a 20-year high. A firmer greenback makes bullion more

expensive for other currency holders.

The benchmark 10-year Treasury yield held close to its

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highest level in over a decade scaled on Monday.

Mirroring investor sentiment, holdings in the SPDR Gold

Trust , the world’s largest gold-backed exchange-traded

fund, fell to 30,799,131 ounces on Monday, the lowest since

March 2020.

Inflation concerns have also prompted other central banks

across the globe to tighten monetary policy.

Spot gold may edge up to a resistance at $1,685 before

falling, according to Reuters technical analyst Wang Tao.

Elsewhere, spot silver lost 0.6% to $19.50 per ounce.

Platinum fell 0.1% to $918.51 and palladium was

down 2.4% at $2,172.19.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by

Sherry Jacob-Phillips and Rashmi Aich)