Fed caution hemmed gold in tight range

February 20, 2023

minute read

On Monday, gold prices remained in a narrow range as speculation of additional interest rate increases from the U.S. The Federal Reserve raised the dollar while lowering expectations for non-yielding bullion.

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As of 0347 GMT, spot gold was barely changed at $1,842.40 per ounce, having dropped the previous session to its lowest level since late December. American gold futures up 0.1% to $1,851.30

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Even though gold is regarded as a hedge against rising costs, higher interest rates deter investment in it.

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According to Hareesh V, head of commodity analysis at Geojit Financial Services, "Recent favorable economic data and comments from the Fed are likely to restrain traders from taking substantial bets on gold on prospects of additional rate hikes." "Gold may trade subpar within a constrained range in the near term."

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Recent economic statistics indicated a strong U.S. economy, increasing consumer prices, a comeback in producer prices, and a tight job market, raising doubts about the Fed's intention to maintain higher interest rates for an extended period of time.

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Last week, some Fed officials indicated that additional rate increases were required to lower inflation to the central bank's 2% target.

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Investors are currently anticipating the release of the Fed's most recent policy meeting minutes on Wednesday. The U.S. central bank is anticipated by the money markets to increase benchmark rates above 5% by May, with a high in rates anticipated for July at 5.3%.

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Currency Index

bullion purchased in greenbacks became less appealing to buyers using other currencies as prices firmed 0.1%.

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Market focus will also be on the U.S. personal consumption expenditures data for January, which is due later this week and is the Fed's favored inflation indicator.

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