How is gold reacting ahead of US Fed meeting

Global gold prices remained flat on Wednesday (June 12) as investors are awaiting the US May inflation report and the Federal Reserve’s policy announcement.

The announcement is expected to provide insights into the potential timing of interest rate cuts.

As of 0541 GMT, spot gold was nearly unchanged at $2,312.69 per ounce, while US gold futures saw a slight increase of 0.1% to $2,329.30.

In India, however, the price of 24k gold surged by ₹320, reaching Rs 72,160 per 10 grams.

“Gold prices have been treading lightly amid the waiting game for greater cues on the Fed’s policy path. Any lean towards two rate cuts could be perceived as a more dovish take, which may see gold prices head higher,” IG market strategist Yeap Jun Rong was quoted as saying in a Reuters report.

Investors are closely watching the US consumer price index (CPI) numbers, set to be released at 1230 GMT, just before the Federal Reserve concludes its two-day policy meeting.

The market remains divided on whether the Fed will cut rates once or twice this year following a robust US labor report.

Thus, attention will be focused on policymakers’ updated economic projections and Chair Jerome Powell’s press conference.

Last week, strong US jobs data and reports of China’s central bank pausing gold purchases led to the largest daily drop in gold prices since November 2020.

However, analysts suggest that China’s central bank may continue its diversification efforts away from the U.S. dollar in the future.

“While China did take a break from gold in May, I don’t believe that the People’s Bank of China is finished with their diversification efforts away from the U.S. dollar,” Tim Waterer, chief market analyst at KCM Trade, noted in a statement.

“It may just be a case that they will be more of a ‘selective buyer’ of gold moving forward,” he was quoted as saying in the Reuters report.

According to Rahul Kalantri, VP Commodities at Mehta Equities, the upcoming US inflation data is anticipated to show a yearly increase of 3.4%.

Should the inflation rate fall and the Federal Reserve signal an interest rate cut, it could support both gold and silver prices.

“In terms of technical analysis, gold has support at $2,294-$2,278 per ounce and resistance at $2,328-$2,342 per ounce. In rupee terms, gold support levels are at ₹71,350-₹70,980 per 10 grams, and resistance is at ₹71,710-₹71,890 per 10 grams,” Kalantri said.

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