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Gold climbs as Fed hints at rate-hike pause

March 23, 2023By Reuters

March 23 (Reuters) – Gold prices extended gains to a second straight session on Thursday, boosted by a slide in Treasury yields after the US Federal Reserve signaled an end to its monetary tightening cycle might be on the cards.

Spot gold rose 1.2% to USD 1,993.09 per ounce by 2:59 p.m. ET (1859 GMT), while US gold futures jumped 2.4% to settle at USD 1,995.90.

The Fed raised rates by a quarter of a percentage point on Wednesday but highlighted that it was on the verge of pausing.

If they truly do pause, that’s a green light for the gold market, with it being a quintessential hedge against inflation, said David Meger, director of metals trading at High Ridge Futures, adding that “it’s likely that inflation would remain elevated if they’re unable to raise rates any further”.

Gold hit a one-year high on Monday, breaching the key USD 2,000 level on safe-haven demand. However, it later ceded some ground as banking sector jitters subsided following the rescue of Credit Suisse.

The outlook still remains positive if the Fed pauses or the banking crisis carries on, analysts say.

Wall Street bank Goldman Sachs hiked its 12-month gold price target to USD 2,050 an ounce from USD 1,950, describing it as the best hedge against financial risks.

“A combination of inflation still being at lofty levels, safe haven alternative investment demand, and the weaker dollar – all of these are significant driving factors behind gold’s recent move,” Meger added.

The dollar spent much of the session near early-February lows, making gold cheaper for holders of other currencies. Benchmark US government bond yields eased and improved zero-yield bullion’s allure.

In other metals, spot silver dipped 0.3% to USD 22.95 per ounce and platinum was up 0.3% at USD 980.67, while palladium fell 1.6% to USD 1,427.17.

(Reporting by Seher Dareen in Bengaluru; Additional reporting by Bharat Govind Gautam; Editing by Christina Fincher and Shounak Dasgupta)


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