Gold hovers near two-week trough on global interest rate concerns

Gold prices declined on Tuesday once again to near two-week lows as the dollar muscled up against major rivals ahead of the Federal Reserve’s policy meeting this week.

Gold is also pressured by concerns about higher global interest rates as the Bank of Japan took a historic decision to abandon negative rates for the first time in 8 years.

Gold Prices Today 

Gold prices fell 0.6% to $2147 an ounce, with a session-high at $2162, after rising 0.2% yesterday, the first profit in three days away from two-week lows at $2146. 

The Dollar

The dollar index rose 0.4% on Tuesday on track for the fourth straight session, scaling a three-week high at 103.99 against a basket of major rivals. 

A stronger dollar makes greenback-denominated gold futures costlier to holders of other currencies.

Dollar’s gains came as US 10-year treasury yields surged following strong US producer and consumer prices data last week, which showcased the continued struggle with inflation in the US, and the likelihood of high interest rates for most of the year. 

US Rates

The odds of a US 0.25% interest rate cut in May stand at just 8%, and 55% for June.

Traders are pricing in 75 basis points of total US interest rate cuts this year. 

The Fed

Later today, the Federal Reserve will open its two-day policy meeting, expected to maintain interest rates unchanged at 5.5%, the highest in 23 years.

The Fed’s policy statement and Fed Chair Jerome Powell’s subsequent press conference will likely provide important clues on the future of US interest rates. 

Global Rates

Bank of Japan voted to end eight years of negative rates today, making it the last bank to exit the unusual territory. 

The BOJ’s policies remain accommodative, with interest rates now at zero percent. 

Otherwise, the Reserve Bank of Australia voted to hold interest rates unchanged at 12-year highs as the fight with stubborn inflation continues.

The SPDR 

Gold holdings at the SPDR Gold Trust rose 1.48 tonnes yesterday to a total of 833.32 tonnes, the highest since February 20.