Gold struggles for direction as traders await US Fed decision

GOLD prices struggled for direction in early Asian trading on Tuesday (Jul 25) as traders braced for a widely anticipated rate hike along with monetary policy clues from the US Federal Reserve over the next two days.

Spot gold rose 0.2 per cent to US$1,958.20 per ounce by 0119 GMT, while US gold futures fell 0.1 per cent to US$1,959.90.

The US dollar index was at a near-two-week peak, weighing on gold as a stronger US dollar makes bullion more expensive for buyers holding other currencies.

Markets are fully priced for quarter-point rate hikes from the Fed and the European Central Bank. So, the focus will be on what Fed chair Jerome Powell and ECB president Christine Lagarde say about the future and their September meetings.

Gold is highly sensitive to rising interest rates as they increase the opportunity cost of holding non-yielding bullion.

A closely-watched purchasing managers’ survey on Monday showed that US business activity slowed, while that of Europe shrunk more than expected in July, implying that both central banks could be close to the end of their rate-hike cycles.

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In China, leaders pledged to step up policy support for the economy amid a tortuous post-Covid recovery, focusing on boosting domestic demand – yet details were scarce and analysts say policymakers are unlikely to deliver any aggressive stimulus due to worries about growing debt risks.

Spot silver rose 0.2 per cent to US$24.42 per ounce, platinum was up 0.3 per cent to US$959.24 while palladium jumped 0.9 per cent to US$1,281.86. REUTERS