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Gold rises as US dollar, yields slip after Fed rate hike

July 26, 2023By Reuters

July 26 (Reuters) – Gold prices extended gains on Wednesday, helped by a weaker dollar and bond yields after the US Federal Reserve delivered a widely expected interest-rate hike and investors digested comments from Chair Jerome Powell.

Spot gold was up 0.5% at USD 1,974.09 per ounce by 03:21 p.m. EDT (1921 GMT). US gold futures settled 0.3% higher at USD 1,970.10.

The Fed raised interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the US central bank’s past 12 policy meetings, and the accompanying policy statement left the door open to another increase.

Powell said “it’s not an environment where we want to provide a lot of forward guidance” about future rate actions, and whether the Fed hikes again will be determined by where the data stands at the time of future policy gatherings.

Rising interest rates increase the opportunity cost of holding non-yielding bullion.

“The general consensus is that the Fed is getting closer to the end of its interest rate hike cycle. As a result, there is an expectation that yields will slowly come down, and that is, generally a supportive environment for gold,” said David Meger, director of metals trading at High Ridge Futures.

The dollar index fell 0.4% against its rivals after the Fed statement, making gold less expensive for other currency holders. US 10-year Treasury yields slipped to 3.862%.

Focus now shifts to policy decisions from the European Central Bank and Bank of Japan due this week.

“Bulls remain nominally in control of the gold narrative but they need to drive prices back above USD 1,988 per ounce recent highs to maintain momentum,” said Tai Wong, a New York-based independent metals trader.

Elsewhere, silver gained 0.9% to USD 24.92 per ounce, platinum was steady at USD 964.60, while palladium lost 1.8% to USD 1,261.13.

(Reporting by Brijesh Patel in Bengaluru; Editing by Krishna Chandra Eluri and Arun Koyyur)


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