By Kavya Guduru
(Reuters) – Gold edged up on Tuesday as the dollar slipped, although an improvement in risk appetite after efforts by regulators to allay fears over the global banking system slowed safe haven inflows into bullion.
Spot gold was up 0.2% at $1,959.63 per ounce, as of 0557 GMT. U.S. gold futures rose 0.3% to $1,960.30.
“The U.S. dollar seems to be stabilising. This should entice fresh buying back into the (gold) market,” said Clifford Bennett, chief economist at ACY Securities.
The dollar index fell 0.2%, making bullion cheaper for buyers holding other currencies. [USD/]
Gold declined over 1% on Monday as investors scaled back on safe-haven trading in favour of riskier assets after First Citizens BancShares said it would take on the deposits and loans of failed Silicon Valley Bank. [MKTS/GLOB]
However, gold remains the “resolute safe-haven” in a “rolling risk environment” for the banking sector as risks of contagion are far more persistent than the market would like to believe, Bennett added.
The U.S. Federal Reserve is “still learning” how much impact its interest rate increases have had on the economy and inflation, Fed Governor Philip Jefferson said on Monday.
“Near term, gold may struggle to break through to new highs… However, with Fed rate cuts coming once the U.S. economy enters recession, bond yields are likely to fall and the gold price may resume its climb,” Heraeus Precious Metals said in a note.
Markets are pricing in a 60% chance of the Fed standing pat on rates in May, according to the CME FedWatch tool.
Higher rates increase the opportunity cost of holding the zero-yield gold.
Gold might break resistance at $2,070 in the second quarter and rise towards $2,148, Reuters technical analyst Wang Tao said.
Silver fell 0.2% to $23.04 per ounce, while platinum rose 0.2% to $972.94 and palladium was up 0.1% at $1,409.70.
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(Reporting by Kavya Guduru in Bengaluru; Editing by Sherry Jacob-Phillips and Sohini Goswami)
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