Gold was down on Thursday morning in Asia but staged a cautious recovery after the yellow metal recorded its biggest drop in five months during the previous session. Investors continue to digest the U.S. Federal Reserve’s latest policy decision that indicated interest rates could be raised sooner than expected.
Gold futures slid 2.07% to $1,822.95 by 12:31 AM ET (4:31 AM GMT), after tumbling more than 2.5% to its lowest level since May 6 during the previous session. The dollar, which usually moves inversely to gold, edged up to a two-month high on Thursday and benchmark 10-year U.S. Treasury yields climbed upwards.
Some investors remained cautiously optimistic, however.
“Gold was crushed overnight by a more hawkish Fed. It has staged a modest recovery in Asia, but the rally looks more like speculative dip buying and fast money short-covering, than a vote of confidence in the yellow metal,” OANDA senior market analyst Jeffrey Halley told Reuters.
“The recovery in gold should be approached with caution as we have yet to see how a change in tone from the Fed will fully play out in markets. Gold’s daily close below $1,797.50 will signal a deeper correction is in prospect,” he added.
The Fed took a surprisingly hawkish tone as it handed down the decision on Wednesday. Out of 18 Fed officials, 11 forecast at least two quarter-point interest rate increases for 2023, in a clear sign that the central bank has begun asset tapering discussions.
“Bargain hunting, safe-haven demand and buying the dips emerged as gold fell to $1,804, although the change in Fed’s script had benefited the dollar and Treasury yields rather than precious metals in the immediate term,” Phillip Futures senior commodities manager Avtar Sandu said in a note.
Investors now await policy decisions from the Swiss National Bank and Norges Bank later in the day, with the Bank of Japan handing its decision down on Friday.
In other precious metals, silver and platinum gained 0.5% while palladium fell 1%. Investing.com