Gold gains as Fed hikes rates as expected; focus on Ukraine talks
Gold prices gained on Thursday as the U.S. Federal Reserve raised interest rate as expected, with investors focusing on the Russia-Ukraine peace talks.
Spot gold rose 0.4% to $1,935.89 per ounce by 0436 GMT after touching its lowest since Feb. 28 at $1,894.70 on Wednesday. U.S. gold futures also rose 1.5% to $1,937.40.
“Right now it’s more of Asia Pacific markets digesting what the Fed did. So, we see gold a bit higher at the open, because the take-away from the Fed was – we’re going to do a lot of hiking now, but not a lot of structural hiking,” said Ilya Spivak, a currency strategist at DailyFX.
The U.S. central bank raised interest rates for the first time since 2018 and laid out an aggressive plan to stamp out inflation.
Gold is highly sensitive to rising U.S. interest rates, which increase the opportunity cost of holding non-yielding bullion.
Fed’s decision lifted the U.S. 10-year Treasury yields to their highest since May 2019 in the last session.
“The move in dollar and stocks was much more aggressive than the move in gold. And that’s probably the Ukraine risks still lingering, where it’s not the all-clear yet,” Spivak added.
Ukrainian President Volodymyr Zelenskiy said negotiations were becoming “more realistic” and Russia said proposals under discussion were “close to an agreement.”
Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.8% to 1,070.53 tonnes on Wednesday – its highest since March 2021.
Palladium, used by automakers in catalytic converters to curb emissions, rose 2.6% to $2,471.77 per ounce.
Spot silver was up 0.9% at $25.29 per ounce, while platinum rose 0.4% to $1,021.50.
