Gold bounces over 1% as dollar retreats post Fed verdict

(Reuters) – Gold jumped more than 1% as the dollar and Treasury yields retreated after the U.S. Federal Reserve hiked interest rates by 75 basis points as expected.

Spot gold rose over 1% to $1,735.49 per ounce by 3:36 p.m. EDT (1936 GMT). U.S. gold futures settled 0.1% higher at $1,719.1.

The Fed raised rates by three-quarters of a percentage point in an effort to cool the most intense breakout of inflation since the 1980s.

Fed Chair Jerome Powell said the lack of clear visibility into the future trajectory of the economy means the central bank can provide reliable guidance about where its policy is headed only on a “meeting by meeting” basis.

“If the market now believes interest rates might not move as high (and) as fast, that is relatively a positive environment for the gold market moving forward and the reason why we’re seeing a positive move after the Fed meet,” said David Meger, director of metals trading at High Ridge Futures.

The dollar’s retreat bolstered gold’s appeal among overseas buyers, while benchmark U.S. Treasury yields also slipped. [USD/] [US/]

“However, gold price risks look to be skewed to the downside as the market continues to take its cue from the USD amid a seasonally slow period for demand as the market prices in rate hike expectations for the September FOMC meeting,” Standard Chartered analyst Suki Cooper said.

Rate hikes to fight soaring inflation tend to raise the opportunity cost of holding bullion, which yields no interest.

The Fed’s aggressive rate hikes and the dollar’s recent rally have overshadowed bullion’s appeal as a safe-haven despite recession risks of late.

Reflecting sentiment, holdings of the SPDR Gold Trust exchange-traded fund touched their lowest since January, to about 32,321,124 ounces. [GOL/ETF]

Other metals latched on to gold’s run. Spot silver rose 2.6% to $19.09 per ounce, platinum added 1.4% to $886.09, while palladium gained 0.6% to $2,023.55.