You are here: Home » Markets » Commodities » Precious Metals
Business Standard

Gold rises 1% after Fed flags inflation, tones down hawkish bets

Gold is often perceived as a hedge against rising costs

Topics
Gold  | US Fed

Reuters  |  (Reuters) - May 5 

Photo: Bloomberg
Photo: Bloomberg

rose more than 1 per cent on Thursday as investors sought cover from soaring inflation, with bullion also extending gains after the US Federal Reserve signalled a relatively less hawkish stance on interest rate hikes.

The Fed on Wednesday raised its benchmark overnight interest rate by 50 basis points, the biggest jump in 22 years, while Chair Powell added the bank was not considering 75-basis-point moves in the future.

Spot rose 0.6 per cent to $1,892.34 per ounce by 7:34 pm (IST), having earlier hit its highest level since April 29. US futures climbed 1.4 per cent to $1,895.50.

"I don't think a whole lot changed in overall Fed policy from yesterday's meeting, but it just gave gold and silver traders an excuse to rally the market after the recent strong selling pressure," said Kitco senior analyst Jim Wycoff.

"The whole scenario in Europe with its energy supplies being constrained having banned some energy imports from Russia, that's leading to instability in the European marketplace, that's prompting safe haven demand for gold, prompting higher inflation in the eurozone," Wycoff added.

Gold's advance came despite gains in the dollar index , which typically hurts appeal for bullion among overseas buyers, and benchmark US 10-year Treasury yields.

But while gold is perceived as an inflation hedge, higher U.S. interest rates and bond yields lift the opportunity cost of holding zero-yield bullion.

"Bond yields will continue rising because of expectations that monetary policy from the Fed and other major central banks will be tightened further ... This is going to hold gold back from going too high in the medium term," said Fawad Razaqzada, market analyst at City Index.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, May 05 2022. 08:37 IST
RECOMMENDED FOR YOU