Gold prices were steady on Wednesday as investors braced for the outcome of a U.S. Federal Reserve meeting and chief Jerome Powell’s remarks on reducing its massive support for the pandemic-hit economy.
Spot gold rose 0.1% to $1,775.36 per ounce by 0840 GMT, while U.S. gold futures fell 0.2% to $1,775.00.
“The markets are already pricing in an increasingly hawkish outcome and the nuances will be in (Powell’s) press conference,” StoneX analyst Rhona O’Connell said, adding gold is also seeing “some safe haven risk-hedging on the back of Evergrande.”
″(But) investment flow overall have been limited with the markets concentrating, if anything over-concentrating on FOMC,” StoneX’ O’Connell added.
The Fed decision remains the focus and could determine gold’s fate in the near-term, as an eventual interest rate hike would raise the opportunity cost of holding non-interest-bearing gold.
Fed’s policy statement after a two-day meet is due at 1800 GMT, which will also offer Fed’s interest rate projections for 2024 for the first time.
“A dovish surprise by way of a Fed that’s slowing its steps on the tapering path, perhaps due to concerns over a waning U.S. economic recovery, could help gold prices move back closer to $1,800,” said Han Tan, market analyst at Exinity Group.
Investors are also following developments at debt-ridden China Evergrande Group after it said it would pay some bond interest due on Thursday, providing some relief for stocks.
“If market participants grow increasingly worried about the global economy’s recovery, that could help boost gold’s allure as well,” Tan said.
However, concerns surrounding possible contagion from Evergrande, along with the elevated VIX, have helped bolster sentiment for gold as a safe haven, he added.
Silver climbed 1.2% to $22.73 per ounce, while palladium gained 2.8% to $1,959.79.
Platinum rose 1.2% to $965.42 per ounce.