Gold trades near weekly high in early trade

27 Jul 2023 , 12:11 PM

Early on Thursday in Asian trading, gold prices remained close to their best levels in a week after the U.S. Federal Reserve announced an interest rate hike that had been widely anticipated and after investors took in Chair Jerome Powell’s rather balanced remarks.

Spot gold was up 0.2% at $1,975.05 an ounce, its highest level since July 20. Futures for U.S. gold increased 0.2% to $1,974.70.

On Wednesday, the Fed increased interest rates by a quarter point, putting the benchmark overnight rate in the range of 5.25%–5.50% and indicating that another 25 bps increase could be possible at the September meeting based on a variety of indicators.

In addition, Fed Chair Jerome Powell noted that while they were no longer predicting a U.S. recession, the economy still needed to slow and the labour market to deteriorate for inflation to ‘credibly’ return to the U.S. central bank’s 2% target.

As the opportunity cost of storing non-yielding bullion increases, gold is particularly susceptible to rising interest rates.

After falling on Wednesday, the dollar and U.S. Treasury yields slightly increased, which restrained gold’s advances.

On the data front, the United States is anticipated to announce that the second quarter’s gross domestic product expanded at a pace of 1.8% annually, while initial applications for unemployment benefits are anticipated to have grown by 7,000 to a seasonally adjusted 235,000 for the week ending July 22.

Attention moves to the policy decisions the European Central Bank and the Bank of Japan are slated to make this week. The ECB is anticipated to hike rates for the ninth time on Thursday before switching to a ‘data-dependent’ strategy.

The price of spot silver increased by 0.3% to $25 per ounce, platinum increased by 0.6% to $967.06, and palladium increased by 0.3% to $1,262.72.

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