Investors proceed to digest the U.S. Federal Reserve’s latest policy decision that registered interest rates could increase sooner.
Gold futures slipped 2.07% to $1,822.95 by 12:31 AM ET (4:31 AM GMT), after tumbling more than 2.5% to its weakest level after May 6 during the previous session. The dollar moves typically inversely to gold, edged up to a two-month high on Thursday, and benchmark 10-year U.S. Treasury yields rose upwards.
Some Investors Continued Carefully Optimistic
Gold took a hit overnight by a more hawkish Fed. It has staged a moderate recovery in Asia. However, the rally looks more like risky dip buying and fast money short-covering than a vote of confidence in the yellow metal. OANDA senior market analyst Jeffrey Halley informed Reuters.
The recovery in gold should be addressed with caution as we have yet to recognize how a change in tone from the Fed will ultimately play out in markets. Gold’s daily close under $1,797.50 will signal a deeper correction is in prospect, he continued.
The Fed took a surprisingly hawkish tone as it returned down the decision on Wednesday. Out of 18 Fed officials, 11 estimates at least two quarter-point interest rate hikes for 2023, clearly showing that the central bank has raised asset tapering discussions.
Bargain hunting, safe-haven demand, and buying the drops emerged as gold declined to $1,804. Nevertheless, the change in Fed’s script had helped the dollar and Treasury yields rather than precious metals. In the short term, Phillip Futures senior commodities manager Avtar Sandu asserted in a note.
Investors now expect policy decisions from the Swiss National Bank and Norges Bank later in the day, with the Bank of Japan giving its decision on Friday.
In other precious metals, silver and platinum increased 0.5%, while palladium dropped 1%.