Gold range-bound with all eyes on Fed verdict

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Gold prices were hemmed into a tight

range on Wednesday with investors focused on the outcome of the

U.S. Federal Reserve’s policy meeting for signals on its rate

hike plans.

Spot gold rose 0.1% to $1,718.91 per ounce by 1607

GMT. U.S. gold futures were little changed at $1,717.00.

Despite gold’s status as an inflation hedge, bullion’s shine

dims amid rising interest rates as it is a non-interest yielding

asset.

“If the Fed hikes rates by 100 bps (basis points), this

might reduce demand for precious metals. But if they stick to a

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75 bps hike, then there is chance that gold could see a relief

rally,” said Jim Wyckoff, senior analyst at Kitco Metals.

With the Fed expected to hike its key interest rate by

three-quarters of a percentage point on Wednesday, focus will

shift to how deeply signs of an economic slowdown have

registered with its policymakers.

“Given the market is priced for a 75 bps hike at this

meeting, the focus will be on whether the September meeting will

see the pace of hikes slow,” TD Securities said in a note.

Gold has lost more than $300 since climbing past the

$2,000-per-ounce level in early March due to the Fed’s

aggressive rate increases and the dollar’s recent rally,

overshadowing bullion’s appeal as a safe-haven despite recession

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risks.

Indicative of market sentiment, holdings of SPDR Gold Trust

, the world’s largest gold-backed exchange-traded fund

(ETF), touched their lowest since January, to about 32,321,124

ounces.

“Exit from the ETFs maybe because investors are rethinking

as paper assets tend not to perform so well during inflationary

times. And one can argue that ETFs are paper assets. If gold

prices start to rebound, we might see inflows into ETFs,”

Wyckoff added.

Spot silver rose 0.2% to $18.64 per ounce, platinum

added 1.1% to $882.95, while palladium gained 0.4%

to $2,018.18.

(Reporting by Ashitha Shivaprasad in Bengalurul; Editing by

Will Dunham and Aditya Soni)