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Gold fell more than 1% on Tuesday as Treasury yields jumped while some traders booked profits after a strong run driven by risk aversion spurred by the banking crisis, as they geared up for the US Federal Reserve’s interest rate decision.
Spot gold dipped 1.3% to US$1,952.39 per ounce by 10 a.m. EDT (1400 GMT), while U.S. gold futures were down similarly to US$1,957.00.
The precious metal hit $2,009.59 on Monday, its highest since March 2022 but has since retreated.
The Fed begins a two-day meeting later on Tuesday, with some top central bank watchers saying it could pause further rate hikes.
“The market wants to hear what they have to say, what (Fed Chair Jerome) Powell has to say about what’s going on in the banking sector and ways to combat that,” most likely by slowing rate hikes, said Bob Haberkorn, senior market strategist at RJO Futures.
“There’s some doubt out there about how he’ll say it and what he’ll say. That’s why gold is lower”, with some profit taking also to blame, Haberkorn added.
According to the CME FedWatch tool, markets are pricing in a 18% chance the Fed will stand pat and a 82% likelihood of a 25 basis points hike.
Higher interest rates raise the opportunity cost of holding zero-yield bullion. Benchmark U.S. 10-year Treasury yields, meanwhile, were near session-highs.
Safe-haven gold has gained over $100 after the collapse of U.S.-based Silicon Valley Bank earlier this month.
Wall Street’s main indexes opened higher as the rescue of Credit Suisse calmed nerves about a bigger banking crisis.
Holdings of the largest gold-backed exchange-traded-fund New York’s SPDR Gold Trust have registered consecutive inflows.
“We could see some marginal selling activity below the US$1,950/oz mark, but expect that the combination of strong physical demand and resurgent investor flows should keep (gold) prices from tumbling,” TD Securities said in a note.
Spot silver fell 0.9% to US$22.31 per ounce, platinum fell 1% to US$978.41 while palladium fell similarly to US$1,399.83.
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