Gold slips to one-week low as US Fed holds interest rates steady

Bengaluru — Gold fell to its lowest in a week on Thursday, as the US Federal open market committee (FOMC) doused expectations of a near-term rate cut, and on lack of physical demand in Asia.

Spot gold shed 0.4% to $1,270.86 an ounce as of 10.18am GMT. It fell to $1,269.69, its lowest since April 24, earlier in the session.  US gold futures fell 0.9% to $1,272.70 an ounce.

“The [gold] market is under pressure after a lack of follow through on the upside as prices could not break above $1,290 after several attempts and there was nothing important out of the FOMC,” said Afshin Nabavi, senior vice-president at MKS SA.

In line with the expectations of most of the market participants, the Fed left the benchmark interest rates unchanged on Wednesday. However, investors were taken by surprise when the US central bank emphasised that it saw no compelling reason to consider a rate cut any time soon, citing continued job gains and economic growth.

Higher interest rates increase the opportunity cost of holding the non-yielding bullion and lifts the dollar, making gold costlier for investors holding other currencies.

“Also, the Far East market is pretty much closed with Japan and China almost gone for the whole week and we are not seeing a lot of demand from that part of the world,” Nabavi added.

The two major centres are shut for holidays. Trading in China will resume on Monday and in Japan on Tuesday.

Gold fell about 0.5% in the previous session, its biggest one-day percentage decline since April 16, after the Fed’s statement boosted the dollar and US treasury yields.

On Thursday, the dollar was down about 0.1% against its key rivals.

“Gold is under pressure again despite the dollar actually paring gains, which could be some insight into traders mentality,” Oanda senior market analyst Craig Erlam said in a note. “Gold was threatening to potentially make a comeback but price action over the past 24 hours hasn’t given bulls much cause for optimism, which looks to have taken its toll.”

Investors are keeping a close eye on the US non-farm payrolls data due on Friday.

Silver was flat at $14.67 an ounce, holding close to a more than four-month low touched on Wednesday. Platinum dipped 0.5% to $859.40, after touching its lowest in a month. Palladium slipped 0.7% to $1,343.55, having touched its lowest level since January 25 at $1,309.67. 

Reuters