Gold firms on Fed rate pause hopes, softer dollar

(Reuters) – Gold prices edged higher on Wednesday on expectations of an interest rate pause at the Federal Reserve’s policy meeting concluding later in the day, while a softer dollar also boosted bullion.

Spot gold rose 0.3% to $1,948.59 per ounce by 1222 GMT. U.S. gold futures gained 0.1% to $1,961.20.

Fed officials sat down on Tuesday to decide the monetary policy on the back of still-strong inflation and uncertainty about the economic outlook and effects of 10 rate hikes since March 2022.

Expectations of the Fed holding interest rates after inflation data came in line with expectations, along with a weaker dollar, were supporting gold, said Peter Fertig, an analyst with Quantitative Commodity Research.

The dollar hovered near a three-week low, making greenback-priced bullion more appealing to overseas buyers. [USD/]

“The outlook is that we are close to the peak (for Fed rate hikes) and that will reduce the attractiveness of the dollar a little,” added Fertig.

Inflation was still double the Fed’s 2% target, which saw markets expecting a 95% chance of a pause in June and a 61% chance of a rate hike in July, according to CME’s Fedwatch tool.

While gold is seen as a hedge against inflation, higher rates to tame price pressures generally weigh on the non-yielding asset’s appeal.

Global shares edged higher as expecting a pause had markets in an upbeat mood. [MKTS/GLOB]

“In the absence of safe-haven demand, any move by gold back to the top-end of the recent range ($1970 and above) could be contingent on a lowering of the U.S. yield outlook from the FOMC,” said Tim Waterer, chief market analyst at KCM Trade in a note.

Key U.S. data for the week included weekly jobless claims on Thursday and speeches by two Federal Reserve members on Friday.

Spot silver rose 0.7% to $23.85 per ounce, platinum was up 0.1% at $977.32 while palladium jumped 0.9% to $1,373.09.