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U.S. dollar index up 0.1%
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Investor allocation to gold remains low - ANZ
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Fed seen raising rates by 25 bps
(Updates prices)
By Kavya Guduru
March 15 (Reuters) - Gold prices edged down in
range-bound trading on Wednesday due to a firmer dollar as
investors assess the U.S. Federal Reserve's rate hike trajectory
after a closely-watched consumer prices report showed still-high
inflation.
Spot gold was down 0.1% at $1,900.97 per ounce as
of 0712 GMT, trading in a $7 range. Prices had briefly slipped
below the key $1,900 level earlier in the session.
U.S. gold futures fell 0.3% to $1,905.10.
"Some degree of relative calm on U.S. banks and an overnight
rise in Treasury yields may temporarily reduce demand for safe
haven proxies" such as gold, said OCBC FX strategist Christopher
Wong.
The dollar index was up 0.1%, making bullion more
expensive for buyers holding other currencies, while U.S.
Treasury yields ticked higher. "As the focus shifts to the Federal Open Market Committee
meeting next week, the question remains what guidance and how
dots plot will evolve taking into consideration the recent
development with some U.S. banks versus combating inflation,"
Wong said.
The Fed is expected to raise its benchmark rate by 25 basis
points next week and again in May, as a government report showed
U.S. inflation remained high in February, and concerns of a
long-lasting banking crisis eased. The U.S. consumer price index (CPI) rose 0.4% last month,
after accelerating 0.5% in January. In the 12 months through
February, the CPI increased by 6%.
Bullion is often seen as a hedge against inflation, but the
opportunity cost of holding the non-yielding asset rises when
interest rates are increased to bring down inflation.
"Investor allocation to gold remains low," analysts at ANZ
said in a note, but added they expect the banking turmoil to
"reinvigorate investor demand over the longer term."
Spot silver rose 0.2% to $21.73 per ounce, platinum was 0.2% higher at $984.59 and palladium was
little changed at $1,507.60.
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(Reporting by Kavya Guduru in Bengaluru; Editing by Sherry
Jacob-Phillips, Savio D'Souza and Sonia Cheema)
