Bengaluru — Gold prices traded in a tight range on Tuesday, as cautious investors focused on the Federal Reserve’s policy decision this week when the US central bank is expected to hike rates aggressively in an effort to curb inflation.
Spot gold held its ground at $1,676.12 an ounce by 4.06am GMT. US 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, with market participants even seeing a 19% chance for a 100 basis points 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 was not 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 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.