By Daksh Grover
(Reuters) – Gold prices held their ground on Wednesday as investors weighed the chances of an outsized interest rate cut by the U.S. Federal Reserve later in the day.
Spot gold was little changed at $2,569.74 per ounce, as of 0732 GMT. Bullion rose to a record high of $2,589.59 on Monday.
U.S. gold futures rose 0.1% to $2,596.00.
The Fed is expected to announce a rate reduction for the first time in more than four years at 1800 GMT. Chair Jerome Powell will hold a press conference afterwards.
Markets are pricing in a 63% chance of a 50-basis-point (bp) cut, up from 34% a week earlier, according to the CME FedWatch tool.
There’s a real risk that market expectations are too optimistic about the Fed making a 50-basis-point cut, said Matt Simpson, senior analyst at City Index, adding that in case of a smaller reduction yields and the dollar could rise significantly, weighing on gold.
If the Fed delivers a 25-bp cut and guides expectations for another 25-bp reduction going forward, gold could dip back beneath the $2,570 level, Simpson said.
Zero-yield bullion tends to be a preferred investment in a lower interest rate environment and during geopolitical turmoil.
Meanwhile, data released on Tuesday showed that U.S. retail sales unexpectedly rose 0.1% in August, suggesting that the economy remained on solid footing through much of the third quarter.
Heightening tensions in the Middle East, the militant group Hezbollah promised to retaliate against Israel, accusing it of triggering explosions in Lebanon on Tuesday that killed nine and injured nearly 3,000.
On the physical front, India’s August gold imports stood at $10.06 billion, compared with $3.13 billion in July, according to the trade ministry.
Among other metals, spot silver fell 0.5% to $30.57 per ounce, platinum edged 0.2% higher to $983.05 and palladium gained 0.2% to $1,118.25.
(Reporting by Daksh Grover in Bengaluru; Editing by Subhranshu Sahu, Sonia Cheema and Eileen Soreng)
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