Gold hits 2-week high as Fed policy meet grabs attention

GOLD prices scaled two-week highs on Tuesday, with the dollar losing its grip on recent six-month highs heading into this week’s central bank meetings that kick off with the US Federal Reserve later in the day.

Spot gold was steady at US$1,932.32 per ounce by 0257 GMT, having hit its highest since Sept 5 earlier in the session. US gold futures were flat at US$1,953.90.

The US dollar eased 0.1 per cent against its rivals, making gold less expensive for overseas buyers, ahead of key central bank policy decisions by the United States, Britain and Japan over the week.

While the Fed is overwhelmingly expected to keep rates unchanged when it announces its policy decision on Wednesday, centre of attention would be on their outlook for futures rates.

“Fed Chair Powell’s speech is likely to highlight that inflation risks have not gone away but they are in a wait-and-see mode for inflation,” said Michael Langford, chief investment officer at Scorpion Minerals.

The low inventories of petrol and diesel globally forms a material risk in the short term to inflation targets, Langford said, adding that if inflation moves materially higher again, it would become more difficult to contain it. Non-interest-bearing gold could see its appeal dim if the Fed further raises rates to control inflation.

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Fed officials, who have tentatively embraced the possibility they can squelch inflation without a recession, meet this week with an autoworkers strike, a possible federal government shutdown, and a student loan squeeze on consumers posing new risks to that best-case outcome.

In other metals, spot silver fell 0.3 per cent to US$23.16 per ounce, platinum eased 0.4 per cent to US$929.49 and palladium jumped 0.8 per cent to US$1,246.21. REUTERS