Gold prices rise as dollar sinks on bets of less hawkish Fed

By Ambar Warrick

Investing.com -- Gold prices rose on Thursday, hovering below the key $2,000 level amid expectations that the Federal Reserve will have limited headroom to hike interest rates further, which also pulled the dollar lower.

While the Fed hiked interest rates as expected and said it was committed to curbing inflation, changes in the Fed’s language saw markets betting that the central bank’s terminal rate was within sight.

This pulled the dollar to a seven-week low against a basket of currencies, benefiting commodities priced in the greenback. The prospect of a less hawkish Fed also boosted the outlook for non-yielding assets such as gold.

Spot gold rose 0.3% to $1,974.58 an ounce, while gold futures jumped 1.4% to $1,976.85 an ounce by 22:31 ET (02:31 GMT). Both instruments rose sharply after the Fed decision on Wednesday.

The Fed hiked interest rates by 25 basis points on Wednesday, but softened its rhetoric on tightening monetary policy- signaling that it may be considering an eventual pause in policy tightening to prevent further economic headwinds. The bank also trimmed its economic growth forecast for the year.

The Fed’s potential shift in policy comes in the wake of a potential banking crisis, which saw several U.S. banks collapse amid a sharp rise in interest rates. The event saw investors pile into gold as a safe haven, with the prospect of slowing U.S. economic growth and a less dovish Fed furthering the case for the yellow metal.

Investment bank Goldman Sachs said in a note that gold remains the best safe haven asset, and hiked its target price for the yellow metal to $2050 an ounce from $1950 an ounce.

U.S. Treasury yields tumbled overnight, and were muted in Asian trade, benefiting metal prices. Bullion prices had surged to a one-year high last week, surpassing the $2,000 level amid fears of a banking crisis. But regulators intervened to soothe market anxiety and restore faith in the banking system, which saw gold consolidate some recent gains.

Other precious metals also advanced on Thursday, with platinum and silver futures up more than 1% each.

Among industrial metals, copper prices jumped back to key levels on Thursday as fears of a banking crisis eased. Markets were also betting on a recovery in key importer China, as it reemerges from three years of COVID lockdowns.

Copper futures jumped 0.8% to $4.0690 a pound.