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Gold trims gains after US Fed signals more rate hikes

June 14, 2023By Reuters

June 14 (Reuters) – Gold prices pared gains on Wednesday after the US Federal Reserve kept interest rates unchanged, as widely expected, but pointed to more rate hikes down the year.

Spot gold was up 0.3% at USD 1,949.89 per ounce by 03:03 p.m. EDT (1903 GMT). US gold futures settled 0.5% up at USD 1,968.9.

The Fed, in new economic projections, signaled that a stronger-than-expected economy and a slower decline in inflation will result in a likely rise in borrowing costs by another half a percentage point by the end of this year.

“Two more hikes in the dot plot for this year was a hawkish surprise…. Gold eased but continues to hold the key technical level at USD 1,940,” said Tai Wong, a New York-based independent metals trader.

“If it (gold) can survive this hawkish surprise, that will give a boost for gold bulls.”

Gold prices are highly sensitive to rising US interest rates, as that increases the opportunity cost of holding non-yielding bullion.

Traders added to bets the Fed will soon be back to raising US interest rates. Traders are now pricing in a 70% chance of Fed rate hike in July, up from 60% earlier, according to the CME Fedwatch tool.

Meanwhile, Fed Chair Jerome Powell said it is too soon to say inflation will continue to retreat even as officials expect price pressure to stay on a cooling trend.

Earlier on Wednesday, data showed US producer prices fell more than expected in May, signaling inflation was cooling. Data on Tuesday showed consumer prices moderated last month.

“Fed members expect additional rate hikes this year as a result we see yields and dollar rise, which applies pressure to bullion,” said David Meger, director of metals trading, High Ridge Futures.

Silver rose 1.2% to USD 23.97 per ounce, platinum was steady at USD 976.19 and palladium jumped 1.8% to USD 1,385.77.

(Reporting by Ashitha Shivaprasad and Brijesh Patel in Bengaluru; Editing by Paul Simao, Maju Samuel, and Krishna Chandra Eluri)


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