Gold prices hovering at a two month low as investors await Fed meeting

Gold prices fell to their lowest level since mid-February on Tuesday, as an inflated dollar and an impending interest rate rise by the US Federal Reserve weakened bullion’s appeal as a hedge against inflation.

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The spot price of gold was $1,858.10 per ounce, down 0.3%. Bullion plummeted more than 2% on Monday, reaching its lowest level since February 16, as the dollar and yields rose on heightened expectations of quicker rate hikes by the US Federal Reserve. Gold futures in the United States were also down 0.3% at $1,857.20.

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The dollar stayed around 20-year highs, making gold priced in dollars less appealing to foreign buyers, while benchmark 10-year Treasury rates exceeded 3% for the first time since December 2018, a critical psychological milestone, reported Reuters.

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The Federal Open Market Committee of the United States’ central bank will begin its interest-rate meeting later in the day and is expected to raise borrowing prices by half a percentage point when it announces its decision on Wednesday.

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The Fed hiked its policy interest rate by 25 basis points in March and is expected to begin selling assets shortly as it strives to tighten pandemic-era monetary policy and curb surging inflation.

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Higher short-term interest rates and bond yields in the United States, according to Reuters, tend to raise the opportunity cost of keeping zero-yield bullion.

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Following a stunning move on Monday by Germany, Russia’s largest energy client, the European Union was planning sanctions on Russian oil supplies in response to its invasion of Ukraine.

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During economic and political downturns, gold is seen as a safe haven of value. Silver fell 0.5% to $22.52 per ounce, platinum fell 0.1% to $934.94, while palladium rose 0.8% to $2,234.12.