scorecardresearchGold steadies as dollar eases, Fed verdict in focus

Gold steadies as dollar eases, Fed verdict in focus

Updated: 25 Jul 2022, 03:42 PM IST
TL;DR.

Spot gold rose 0.2% to $1,729.03 per ounce by 0911 GMT. U.S. gold futures eased 0.1% to $1,726.40.

FILE PHOTO: Gold bullion is displayed at GoldSilver Central's office in Singapore June 19, 2017. REUTERS/Edgar Su

FILE PHOTO: Gold bullion is displayed at GoldSilver Central's office in Singapore June 19, 2017. REUTERS/Edgar Su

(Reuters) - Gold prices held steady on Monday as the dollar slipped, with the Federal Reserve likely to raise benchmark interest rate by an expected 75 basis points in its meet later this week.

Spot gold rose 0.2% to $1,729.03 per ounce by 0911 GMT. U.S. gold futures eased 0.1% to $1,726.40.

The dollar index edged 0.2% lower, making greenback-priced bullion less expensive for overseas buyers.

Gold is expected to hold around these lower $1,700 levels in the lead up to the Fed decision, said Han Tan, chief market analyst at Exinity, adding any surprise could jolt bullion either way.

The Fed is expected to opt for another 75-basis-point hike rather than a larger move to quell stubbornly-high inflation as the likelihood of a recession over the next year rises to 40%, a Reuters poll of economists found.

Last month's 75 bps hike was the first of that size since 1994.

Although gold is considered a hedge against inflation, rising interest rates reduce appeal for the non-yielding asset.

"(And) as long as the Fed can persist with its 'pedal to the metal' approach in combating multi-decade high inflation, gold prices are set to have scarce prospects for significant upside," Exinity's Tan added.

Gold prices have dropped more than $350, since climbing past the $2,000-per-ounce level in early March, due to the Fed's rapid rate hikes and the dollar's recent rally.

Spot silver rose 0.5% to $18.69 per ounce, while platinum fell 0.2% to $871.65.

Palladium lost 1.8% to $1,994.25.

While growing recessionary fears favour fund flows into the U.S. dollar rather than gold, silver is struggling due to recent challenges in the electronics sector, ANZ said in a note.

First Published: 25 Jul 2022, 03:42 PM IST