Gold Rises as Market Questions Fed's Resolve
Gold prices edged higher in Thursday's trading as investors assessed statements from Federal Reserve official Kevin Warsh following the central bank's decision to hold interest rates steady.
Spot gold rose 0.3% to US$4,076.29 per troy ounce, having surged as much as 2% in the previous session.
Warsh reiterated the Fed's commitment to bringing inflation toward its 2% target. However, the market felt he failed to provide a sufficiently strong signal regarding the next interest rate hike. Consequently, the probability of a rate increase in September fell to approximately 63%, down from 81% prior to the Fed's decision.
Diminished expectations for rate hikes eased pressure on gold, a non-yielding asset. Demand for safe-haven assets remained supported after the United States launched fresh strikes against Iran, although oil prices pared gains as some tankers managed to depart the Middle East.
As a result, gold has the potential to hold around the US$4,000 level as long as the market doubts the Fed's resolve and geopolitical tensions continue to escalate. However, gains could be limited ahead of US PCE inflation data, while some analysts warn that gold risks sliding back toward US$3,900 should the dollar and bond yields strengthen again.
Source: Newsmaker.id
