Gold bounces over 1% as yields retreat post Fed verdict

Sept 21 (Reuters) – Gold prices rebounded on Wednesday as Treasury yields retreated after the US Federal Reserve hiked interest rates by an expected 75 basis points.

Spot gold was 0.7% higher at USD 1,673.86 per ounce by 4:12 p.m. EDT (2011 GMT), rising over 1% earlier.

US gold futures settled up 0.3% at USD 1,675.70.

The Federal Reserve raised its target interest rate by three-quarters of a percentage point, and signaled more increases.

“The (gold) market quickly realized that the rate hikes and more importantly, the expected path of rate hikes was well-factored into market prices… we subsequently have seen a significant bounce back off those lows,” said David Meger, director of metals trading at High Ridge Futures.

Prices, which were hovering near their lowest in over two years, initially moved lower after the statement but swiftly reversed course to climb over 1%.

Bullion’s gains came despite a stronger dollar, while benchmark 10-year US Treasury yields retraced from their highs.

“The move lower in yields has supported the bounce in gold post FOMC meeting,” Standard Chartered analyst Suki Cooper said.

“It is possible we could see some short covering activity amid a relief rally, but the hawkish commentary is set to keep gold prices on their longer-term downtrend,” Cooper added.

The Fed’s new projections showed policy rate rising to 4.4% by the end of this year, and to 4.6% in 2023.

Rate hikes to fight soaring inflation tend to raise the opportunity cost of holding zero-yield bullion.

“While price action could indicate that gold may have established a short-term bottom at USD 1,655, the upside will remain a challenge given a clear message from the Fed that rate hikes are emphatically not done,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.

Latching on to gold’s run, spot silver gained 1.4% to USD 19.57 per ounce.

Platinum lost 1.6% to USD 907.79 and palladium fell 1.1% to USD 2,143.82.

(Reporting by Kavya Guduru in Bengaluru; Editing by Shailesh Kuber)