Gold off its five-week high but steadies above $1,900

Bengaluru — Gold prices slipped on Tuesday from a five-week high, but held above the $1,900 level as expectations grew that the US Federal Reserve would dial back its rate hikes after the collapse of two big regional banks.

Spot gold was down 0.3% at $1,906.75 an ounce at 3.21am GMT, after rising more than 2% on Monday to hit its highest since February 3. US gold futures also fell 0.3% to $1,911.00.

As the risk environment attempts to stabilise, any less hawkish rate bets were likely to have to seek validation from the upcoming US consumer price index release, that could trigger some profit-taking, IG market analyst Yeap Jun Rong said.

US officials have announced several measures to limit the fallout from the shuttered Silicon Valley Bank, the largest bank failure since the 2008 financial crisis, and restore investor confidence in the banking system. Regulators closed New York-based Signature Bank on Sunday.

Markets are pricing in a 29.4% chance of a pause in rate hikes at next week’s Fed policy meeting. Considered a hedge against economic uncertainties, zero-yield gold also becomes a more attractive bet in a low interest rate environment.

The short-term outlook for gold looks strong, analysts at ANZ said in a note, adding that the metal had jumped above its 50-day moving average, signalling a change in momentum. “With investor allocation relatively low, we expect this to continue,” they said.

The US consumer price index (CPI) report due at 12.30pm GMT will be closely watched for cues on the Fed’s rate-hike plan.

“Should the data deliver another upside surprise, the Fed could be more hand-tied in its policy decision, which could see market expectations reverting to a hawkish recalibration,” IG’s Yeap said.

The dollar index was up 0.3%, making bullion more expensive for buyers holding other currencies.

Spot silver fell 0.5% to $21.70 an ounce, platinum lost 0.5% at $991.19 and palladium shed 1% at $1,459.20.