Inflation concerns keep gold steady after Fed maintains its position

Gold prices stabilized after an early fall on Thursday as market participants weighed in on the US Federal Reserve’s commitment to keep interest rates low for some time amid a likely rise in inflation.

Gold spot was flat at $ 1,737.89 an ounce by 04.07 GMT. US gold futures fell 0.1% to $ 1,739.20 an ounce.

Fed officials intend to keep the economy alive until its recovery is safer, minutes from the last US central bank meeting released on Wednesday showed.

“The Fed was very confident in its position on interest rates, although investors were not convinced,” said Michael McCarthy, chief market strategist at CMC Markets.

“Investors expect the Fed to have to raise interest rates as early as January 2022, as this will be a huge challenge when inflation starts spiraling out of control.”

Several politicians at the FRS meeting on March 16-17 indicated that, in their opinion, interest rates may need to be raised earlier than most of their colleagues expected, and possibly as early as next year, according to the minutes.

Unproductive gold tends to lose popularity as interest rates rise as it increases the opportunity cost of owning bullion.

Recent economic data indicate a faster recovery from the effects of the pandemic and an increase in risk assets. Futures on US stock indexes rose and hit a record high on Thursday, which influenced the attractiveness of gold.

In the short term, gold will gain support at $ 1,727 and $ 1,720 levels, followed by $ 1705, OANDA senior market analyst Jeffrey Halley said in a note.

The SPDR Gold Trust, the world’s largest exchange-traded fund backed by gold, said its reserves fell 0.35 tons to 1,028.69 tons on Wednesday.

Providing support to gold, the US dollar has tracked declines in Treasury yields and traded near more than two-week lows compared to its major peers on Thursday.

Among other metals, silver fell 0.1% to $ 25.09 an ounce, while palladium fell 0.3% to $ 2,614.98. Platinum rose 0.6% to $ 1,232.99.