Gold rises on dollar retreat as Fed decision looms


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Gold prices rose on Wednesday, following

a slight retreat in the dollar, as investors waited to see

whether the Federal Reserve would opt for the sharpest U.S. rate

hike since 1994.

Spot gold rose 0.5% to $1,816.79 per ounce by 1:35

p.m. EDT (1735 GMT), while U.S. gold futures gained 0.3%

to $1,819.50.

The dollar is trading marginally lower, boosting gold ahead

of the Fed’s rate decision, DailyFX analyst Warren Venketas

said.

The policy decision is due at 2 p.m. EDT (1800 GMT), with

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many traders, according to CME’s FedWatch Tool, pricing in a 75

basis point hike from the Fed.

The dollar index was down 0.1%, while Treasury yields

also dipped.

Uncertainty regarding the outcome of Wednesday’s FOMC

meeting is also prompting some buying interest in safe-haven

metals, said Jim Wyckoff, senior analyst at Kitco Metals.

Although gold is considered a hedge against inflation, rate

hikes increase the opportunity cost of holding non-yielding

bullion.

With markets participants almost fully pricing in two

consecutive 75 bps hikes, “gold and risk markets alike could be

set up for a short-squeeze,” TD Securities said in a note.

Investors also took stock of data showing an unexpected fall

in U.S. retail sales in May amid record high gasoline prices.

Meanwhile, Goldman Sachs said a “wealth shock” due to

lockdowns in China merely delayed rather than derailed its

upside view for bullion.

A rebound in emerging market demand, strong ETF inflows,

central bank buying amid U.S. growth weakness into 2023 all

augur well for gold, the bank said, projecting a three-month

price target of $2,100 an ounce.

Spot silver rose 1.4% to $21.37 per ounce, while

platinum was up 0.8% at $927.84. Palladium rose

2.2% to $1,855.02 per ounce.

(Reporting by Kavya Guduru in Bengaluru; Editing by Anil

D’Silva)



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