Gold up on softer dollar with cenbank rate moves in focus

April 20 (Reuters) – Gold prices edged up on Thursday, after hitting a more than two-week low in the previous session, as the dollar eased while investors grappled with the likelihood of more interest rate hikes by central banks to contain inflationary pressures.

Spot gold was up 0.2% at USD 1,997.68 per ounce, as of 0718 GMT. U.S. gold futures rose 0.1% to USD 2,009.20.

The dollar index was down 0.1%. A weaker dollar makes gold less expensive for buyers holding other currencies.

“Despite gold’s break below USD 1,980 yesterday, investors were quick to snap up the quick discount and drive spot prices back above this key support level… But we’re also on guard for the U.S. Federal Reserve members to remain hawkish into Saturday’s blackout period ahead of the Fed’s next meeting,” said Matt Simpson, a senior market analyst at City Index.

New York Fed President John Williams said on Wednesday that inflation is still at problematic levels and the Fed will act to lower it.

The CME FedWatch tool shows markets pricing in an 83.4% chance of a 25 basis-point hike in May.

Rate hikes raise the opportunity cost of holding non-interest-bearing gold.

The Fed will deliver a final 25-basis-point rate increase in May and then hold rates steady for the rest of 2023, a Reuters poll showed.

“A slew of hawkish comments from the Fed, European Central Bank and Swiss National Bank combined with stubbornly high UK inflation have investors second-guessing their calls for rate cuts this year,” Simpson added.

Britain’s consumer price inflation stayed in the double-digit territory in March, while Euro zone inflation eased last month but underlying readings remained stubbornly high, bolstering expectations for more rate hikes from the Bank of England and the ECB.

Spot silver lost 0.3% to USD 25.18 per ounce, platinum slipped 1% to USD 1,079.55 and palladium dipped 1.7% to USD 1,588.68.

(Reporting by Kavya Guduru in Bengaluru; Editing by Rashmi Aich, Eileen Soreng and Christina Fincher)