Gold flat, Fed meeting expectations offset Ukraine risks

[BENGALURU] Gold prices were little changed on Wednesday (Jan 26), ahead of a US Federal Reserve meeting that would decide on rate hikes for the year, while safe-haven bullion was supported by concerns over the Russia-Ukraine conflict.

Spot gold was flat at US$1,847.51 per ounce by 1.08 am GMT. US gold futures were down 0.2 per cent to US$1,848.90.

US President Joe Biden said on Tuesday he would consider personal sanctions on President Vladimir Putin if Russia invades Ukraine, as Western leaders stepped up military preparations and made plans to shield Europe from a potential energy supply shock.

The Fed's 2-day meeting ends later in the day and Fed funds futures have fully priced in a quarter-point tightening for the Fed's March meeting, plus 3 more for 2022.

Gold is generally seen as an inflationary hedge, but it is highly sensitive to rising US interest rates, which increases the opportunity cost of holding non-interest bearing bullion.

Expected interest rate hikes by the Fed may delay emerging Asia's economic recovery and keep pressure on policymakers to guard against the risk of capital outflows, a senior International Monetary Fund official said on Tuesday.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings rose about 0.5 per cent to 1,013.10 tonnes on Tuesday from 1,008.45 tonnes on Monday.

Rating agency Moody's cut Kyrgyzstan's credit rating to B3 from B2, saying the authorities' decision to nationalise the Central Asian nation's largest gold mine last year indicated weak governance and investment climate deterioration.

Spot silver was down 0.1 per cent to US$23.79 an ounce.

Palladium shed 0.3 per cent to US$2,192.70 and platinum was unchanged at US$1,025.27.

REUTERS