Bengaluru — Gold retreated on Wednesday as the dollar briefly halted its slide and investors booked profits after prices hit a record high in the last session, ahead of the US Federal Reserve’s monetary policy decision.
Spot gold was down 0.4% at $1,950.64/oz by 3.32am GMT. Prices hit a record high of $1,980.57 on Tuesday. US gold futures rose 0.1% to $1,947.10.
Gold is closely following moves in the dollar, which has halted its fall, said DailyFx currency strategist Ilya Spivak. “As we get closer to the Fed announcement and the event risk, the market will get a bit more wary,” Spivak said.
The dollar index was little changed at 93.683 , having touched its lowest level since June 2018 this week.
A weaker dollar, also considered a rival safe haven, makes gold cheaper for holders of others currencies. Coronavirus cases continued to surge in the US and stood at more than 16.6-million globally.
Its intensifying spread and an escalation in US-China tension has dented the hope of quick economic recovery, and have been driving inflows to safe-haven assets like gold, which has risen more than 28% so far in 2020.
The Fed will publish its interest rate decision at 6pm GMT, widely expected to keep rates unchanged, following which chair Jerome Powell is scheduled to hold a press conference.
“I expect the Fed to maintain its uber-dovish tone and this will support precious metals prices,” said Jeffrey Halley, a senior market analyst at Oanda.
Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding non-yielding bullion. It is also considered a hedge against inflation and currency debasement as central bank pump out stimulus.
Meanwhile, Republicans in the White House and the US Congress struggled to reach a deal over a $1-trillion aid plan.
Elsewhere, silver dropped 1.6% to $24.19/oz, platinum fell 1.3% to $935.62 and palladium slipped 1.2% to $2,255.18.