Gold drifts lower after Powell pushes back prospect of March rate cut

Jan 31 – Gold prices reversed course and edged lower on Wednesday after the Federal Reserve Chair Jerome Powell pushed back strongly against expectations of a US rate cut by March.

Spot gold eased 0.1% at USD 2,034.37 per ounce by 03:10 p.m. ET (2010 GMT) after rising as much as 1% earlier in the session. Bullion was down 1.3% this month but has held above the USD 2,000 per ounce psychological level so far this year.

US gold futures settled 0.8% higher at USD 2067.4.

The US central bank left interest rates unchanged but Powell knocked down the idea the Fed could cut rates in the spring, which many market participants have been expecting.

Powell sounded some dovish notes but the key comment is “not March”, which should keep the rate-cut hounds at bay for now, said Tai Wong, a New York-based independent metals analyst.

Gold has really been fairly bulletproof, but incoming data will be heavily parsed, Wong added.

Bullion is considered a hedge against inflation and economic uncertainties but higher rates increase the opportunity cost of holding the non-yielding asset.

Traders trimmed bets on the March start to US rate cuts, and now see a May start as about as likely.

The dollar index pared losses while the benchmark 10-year US Treasury yields fell to near 3-week lows after the Fed verdict.

Strong physical and central bank demand for gold will continue, said Daniel Ghali, commodity strategist at TD Securities.

Data showed US private payrolls rose far less than expected in January. Investors also took stock of news the New York Community Bancorp cut its dividend and posted a surprise loss, renewing fears over the health of similar lenders.

Spot silver prices fell 1.2% to USD 22.88 per ounce, platinum eased 0.4% at USD 917.20, while palladium gained 0.3% at USD 979.31. All three metals were poised for monthly declines.

(Reporting by Anushree Mukherjee and Ashitha Shivaprasad in Bengaluru; Editing by Shailesh Kuber and Krishna Chandra Eluri)