Gold rates today: Yellow metal pulls back over high interest rates by US Fed, silver trades flat

Gold prices retreated on Thursday, May 2, as focus returned to chances of US interest rates staying higher for longer, with traders also positioning for more economic data that could influence the US Federal Reserve's strategy.

Spot gold fell 0.95 per cent to $2,295.92 per ounce, while US gold futures for June delivery fell 0.25 per cent to $2,305.20 per ounce. Spot silver fell 0.26 per cent to $26.57 per ounce, while spot platinum rose 0.08 per cent to $951.00 per ounce. Spot palladium fell 1.73 per cent to $932.45 per ounce, according to news agency Reuters. Coming to domestic prices, gold futures declined 0.16 per cent lower to ₹70,615 per gram on the multi commodity exchange (MCX).

US Fed to hold rates at 23-year high-mark until inflation cools, slows pace of balance sheet runoff: 5 key highlights

Why is gold under pressure?

-Analysts say that given the sticky inflationary environment and the relative strength of the US dollar, there has been some pressure on the gold market over the course of the last couple of weeks. They believe the pullback has not yet run its course.

-The US Fed held interest rates steady on Wednesday and signalled it is still leaning toward eventual reductions in borrowing costs, but flagged a 'lack of further progress' on inflation. The Fed's preferred inflation measure - the personal consumption expenditures price index - increased at a 2.7 per cent annual rate in March, an acceleration from the prior month.

-Market's attention has now turned to the US non-farm payrolls report due on Friday, and an "extremely strong jobs number" could see the outlook for rate cuts pulled back even further, according to analysts.

-While gold is traditionally considered a hedge against inflation, high interest rates kept by the US central bank to tame the rising prices can increase the opportunity cost of holding the non-yielding bullion.

-Today's moves in gold to normal chart consolidation after Wednesday's gains, which were based on notions that while the Fed's statement leaned hawkish, it was not as hawkish as some might have feared, said analysts.

: Gold rate outlook: Goldman Sachs raises yellow metal price forecast to $2700 per ounce by year-end

Where are prices headed?

COMEX gold prices recouped early losses after the much awaited Fed policy meeting. Disappointing data released earlier yesterday showed US job openings tumbled to a three year low, while the ISM Manufacturing PMI contracted to 49.2 in April, from 50.3 in March. The meeting was perceived as less hawkish, which might provide some tailwind to gold prices, according to Kaynat Chainwala, Senior Manager-Commodity Research, Kotak Securities.

On the domestic front, gold prices experienced a decline from the higher levels of 71,200 to 70,600, driven by profit booking opportunities following a gap up opening. Market uncertainty surrounding the interest rate cycle and potential cuts ahead contributed to the downward pressure on gold prices, according to analysts. 

The dollar index found support after the Fed statement hinted at interest rates being held higher for a longer duration, prompting profit booking in bullions. ‘’Investors are now awaiting the nonfarm payrolls and unemployment data, which are expected to provide further insights into the direction of bullion prices,'' said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

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