On Tuesday, gold prices saw a slight increase as investors eagerly anticipate the Federal Reserve policy meeting.
The expectation is that the US central bank will ease its monetary policy tightening in light of the recent banking sector turmoil. At 0546 GMT, spot gold had risen 0.2% to $1,982.29 per ounce, while U.S. gold futures had increased 0.1% to $1,984.30.
The CME FedWatch tool indicates that there is a 26.9% chance that the Fed will maintain the status quo at the end of its March 21-22 meeting, with a 73.1% likelihood of a 25-basis-point hike.
Matt Simpson, a senior market analyst at City Index, noted that gold is currently trading near $1,980, remaining well within yesterday’s range, which he described as a “game of two halves.” Simpson explained that if there is a pause in rate hikes, it could result in gold prices initially surpassing $2,000.
However, in order for the gains to be sustained, he believes there needs to be a lower dot plot and a dovish press conference. Simpson added that it is more probable that there will be a 25 basis point hike and the Fed will emphasize a “data dependent” approach.
When there is financial uncertainty, gold is commonly viewed as a safe haven, and lower interest rates can increase the attractiveness of non-yielding bullion by reducing the opportunity cost of holding it.
Gold prices underwent volatile trading on Monday, initially dropping by 1%, but then rebounding to reach their highest point since March 2022 at $2,009.59. This followed investors processing the impact of measures implemented by several central banks aimed at containing a banking crisis and stabilizing global financial markets.
On Sunday, UBS had agreed to acquire competitor Credit Suisse for $3.23 billion in a hastily arranged merger orchestrated by Swiss authorities, which helped alleviate selling in bank shares. Nonetheless, market sentiment remained uncertain, prompting buying interest in gold, according to analysts at ANZ.
Spot silver experienced a 0.2% increase, reaching $22.57 per ounce, while platinum saw a 0.2% decrease, falling to $986.53. Palladium, on the other hand, rose 0.2% to $1,417.54.
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