By Deep Kaushik Vakil
(Reuters) – Gold extended gains on Wednesday on a weaker dollar and lower yields amid wider economic uncertainty, while investors positioned for the Federal Reserve’s interest rate decision.
Spot gold was 0.3% higher at $2,021.69 per ounce by 11:02 a.m. EDT (1502 GMT), touching a fresh high since April 14.
U.S. gold futures rose 0.4% to $2,030.80.
Prices eased briefly after data showing U.S. private employers boosted hiring in April, but soon reversed course as 10-year Treasury yields fell and the dollar index shed 0.5%. [US/] [USD/]
The Fed’s rate decision is expected at 2:00 p.m. EDT, with markets pricing in an 83% chance of a 25-basis-point hike.
“We’re back and forth all morning about what is (Fed Chair Jerome) Powell going to say,” said Bob Haberkorn, senior market strategist at RJO Futures.
If they hint at a pause to rate hikes, gold should rally significantly, or if they indicate hikes are still coming, gold will probably be sold off, Haberkorn added.
The central bank could also signal a pause in its 14-month tightening cycle, as policymakers balance the need to slow inflation against risks ranging from bank failures to the possibility of a U.S. debt default as soon as next month.
Non-yielding bullion, which is a customary safe haven against inflation and economic uncertainty, draws lower demand when higher interest rates boost returns on competing assets with yields.
Prices gained 1% in April as the U.S. banking crisis spurred a flight to safety.
Gold is caught between growing anxiety over the U.S. banking crisis and uncertainty over the Fed’s stance, but difficulties surrounding a bipartisan agreement over the debt ceiling have the potential to offer further support, ActivTrades senior analyst Ricardo Evangelista said.
Silver rose 0.3% to $25.46 per ounce, platinum dropped 0.8% to $1,057.38, while palladium gained 0.3% to $1,433.11.
(Reporting by Deep Vakil and Arundhati Sarkar in Bengaluru; editing by Barbara Lewis and Nick Macfie)
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