Gold edges lower as markets seek clarity on Fed rate hikes

By Ambar Warrick

Investing.com -- Gold prices fell slightly in Asian trade on Wednesday, but hovered around key levels as markets awaited more cues on U.S. monetary policy from a string of upcoming Federal Reserve speakers and reports. 

The yellow metal retook the $2,000 level on Tuesday as the dollar and U.S. Treasury yields cooled after a recent recovery rally. But further gains were held back by growing uncertainty over the path of U.S. interest rates, with recent hawkish signals from Fed speakers having spooked markets. 

Still, gold remained relatively well bid amid fears of an economic slowdown this year, as the effect of high interest rates is felt by the global economy.

Spot gold fell 0.1% to $2,002.76 an ounce, while gold futures fell 0.2% to $2,015.00 an ounce by 22:01 ET (02:01 GMT). Both instruments advanced on Tuesday after two days of steep losses.

Focus is now squarely on a slew of cues from the Federal Reserve, starting with the Beige Book economic report due later on Wednesday. Fed Governors Christopher Waller and Lisa Cook are also set to speak on Thursday and Friday, respectively.

Hawkish comments from Fed officials, coupled with some signs of resilience in the U.S. economy spurred resurgent fears that U.S. interest rates could rise more than expected. 

Fed Fund futures prices show markets pricing in an 85% chance for a 25 basis point hike in May, followed by a 19% chance of a similar move in June. Markets were initially pricing in a negligent possibility of a June hike, with a majority still expecting the Fed to pause. 

The prospect of rising interest rates bodes poorly for gold and other metals, given that it increases the opportunity cost of holding non-yielding assets. But precious metals have benefited from increased safe haven demand, amid fears that rising interest rates will batter economic growth this year.

Other precious metals fell slightly on Wednesday. Platinum futures fell 0.2%, while silver futures lost 0.3%. 

Among industrial metals, copper prices fell on Wednesday, taking little support from stronger-than-expected Chinese economic growth data.

Copper futures fell 0.4% to $4.0755 a pound.

While China’s economy rebounded more than expected in the first quarter of 2023, signs of continued weakness in the manufacturing sector raised concerns over commodity demand in the world’s largest copper importer.