Gold inches lower on firmer US dollar ahead of Fed meet

[BENGALURU] Gold edged lower on Tuesday as the US dollar firmed while traders waited to gauge the path of US monetary policy for the rest of the year from the two-day Federal Reserve meeting that kicks off later in the day.

Spot gold was down 0.1 per cent to US$1,314.98 per ounce at 0758 GMT. In the previous session, it touched US$1,307.51 an ounce, its lowest since March 1.

US gold futures for April delivery dropped 0.2 per cent to US$1,314.70 per ounce.

The US dollar rose 0.4 per cent to 106.55 yen inching away from a 16-month low of 105.24 yen set early March.

"Gold is trading in a relatively narrow range leading into the Fed meeting, continuing a period of extremely low volatility for the precious metal," said Jordan Eliseo, chief economist at gold trader ABC Bullion.

Prices for the yellow metal have not dipped below the US$1,300 an-ounce level since the beginning of the year and have been trading in a US$23 range since March 8.

"A rate hike is priced in, so the bigger question for the market is the Fed's outlook for monetary policy across the rest of the year, and how much more tightening we will see." Powell is expected to hike interest rates and signal three more increases this year.

Though a rate hike today has been factored into the current price, uncertainty remains as to how further tariffs in the United States will impact global trade, said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS.

A hike of more than 25 basis points would push prices lower, while a significant reaction from China and European countries on (US) tariffs would drive prices higher, said Alexander.

Higher interest rates tend to boost the US dollar and push bond yields up, pressuring gold prices by increasing the opportunity cost of holding non-yielding bullion, while political and financial uncertainty push up safe-haven demand for the yellow metal.

Holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, holdings rose 1.26 per cent, their best one-day percentage rise since Jan 18, to 850.84 tonnes on Monday from 840.22 tonnes on Friday.

Among other precious metals, silver slipped 0.1 per cent to US$16.29 per ounce after matching Friday's three-month low in the previous session.

Platinum fell 0.4 per cent to US$949.49 per ounce after hitting its lowest since Jan 3 on Monday. Palladium rose 0.4 per cent to US$993.60 per ounce.

REUTERS