Gold in flux as investors await Fed meeting

Gold wavered as traders looked ahead to a week with a Federal Reserve rate decision meeting and key US jobs data.

Policymakers are expected to reaffirm their stance for higher-for-longer interest rates at the conclusion of a two-day meeting Wednesday. The last time Fed Chair Jerome Powell spoke, he signaled that policymakers were likely to keep borrowing costs high for longer than previously anticipated, pointing to the lack of progress on bringing inflation down, and enduring strength in the labor market. The US non-farm payrolls number due Friday will also be crucial for traders.

With the Fed’s preferred measure of inflation rising at a brisk pace in March, swap traders now see only one Fed reduction this year, well below the roughly six quarter-point cuts seen at the start of the year. Higher rates are typically negative for gold as it doesn’t pay interest.

“Markets have already discounted a ‘no rush’ profile for rate cuts, whereas we see a low likelihood of the Fed’s next move morphing into a hike, suggesting the scope for Fed funds expectations to weigh on gold markets has declined,” said Daniel Ghali, commodity strategist at TD Securities. Ghali sees more upside in prices as “Shanghai traders are back on the bid in gold” with their bullish wagers inching back toward historical record highs.

Elsewhere, the yen surged after touching its weakest level against the dollar in 34 years, amid speculation the Japanese government intervened to support its beleaguered currency for the first time since 2022. Any action could weaken the dollar, potentially boosting bullion.

Gold has climbed more than 13% this year, hitting a record earlier this month, despite the timeline for Fed cuts being pushed back. The precious metal’s ascent over the past two months has been linked to central-bank purchases, robust demand from Asian markets especially China, and elevated geopolitical tension from Ukraine to the Middle East. Spot gold was little changed at $2,337.85 an ounce at 11:58 a.m. in New York. The Bloomberg Dollar Spot Index fell 0.3%, following two weekly gains. Silver, palladium and platinum all gained.