Gold Holds Steady in Early Trade as Investors Await Fed Decision

14 Jun 2023 , 11:49 AM

As the dollar weakened on Wednesday, gold prices held steady as traders evaluated US inflation data and its implications for the Federal Reserve’s much-anticipated policy announcement scheduled for later in the day.

Spot gold was down the previous session and was up 0.1% at $1,945.29 per ounce. At $1,958.30, U.S. gold futures were unchanged.

The U.S. currency softened marginally, enticing foreign buyers with bullion priced in US dollars.

The consumer price index saw its smallest annual increase in more than two years, but underlying price pressures remain significant, indicating that inflation will not quickly abate and may continue to support the possibility of a Fed rate hike.

According to CME’s Fedwatch tool, the probability that the Fed will maintain its target rate on Wednesday in the range of 5% to 5.25% is presently at 94.2%.

In what may be considered the inaugural meeting of the ‘will-they-or-won’t-they’ era, Federal Reserve officials met on Tuesday for the first time in 15 months without discussing an interest rate hike.

Although gold is regarded as an inflation hedge, higher rates to calm price pressures typically reduce the attraction of the non-yielding asset.

Asian markets are expected to begin with a bang after the headline U.S. inflation number came in below expectations on Tuesday, setting the stage for a rally in all risky assets, however investors should be aware of the sharp increase in U.S. bond yields.

According to a Bank of America survey released on Tuesday, global fund managers reduced their stock allocations to a five-month low and reduced their cash levels to 5.1%, the lowest level since January 2022.

 Spot silver remained constant at $23.6921 per ounce, while platinum increased by 0.3% to $979.64 and palladium remained constant at $1,361.55.

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