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Fed statement due at 1800 GMT on Wednesday
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Market seeing heavy profit taking - analyst
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SPDR Gold Trust ETF seeing consecutive inflows
(Adds details and graphic, updates prices)
By Seher Dareen
March 21 (Reuters) - Gold dropped about 2% on Tuesday as
Treasury yields jumped and easing worries over a banking crisis
prompted some investors to cautiously return to riskier assets,
while markets await the U.S. Federal Reserve's next interest
rate decision.
Spot gold dipped 2.1% to $1,938.19 per ounce by 1:31
p.m. EDT (1731 GMT). U.S. gold futures , too, fell 2.1% to
settle at $1,941.10. The precious metal hit $2,009.59 on Monday,
its highest since March 2022, but has since retreated.
"We're seeing a little bit less risk aversion in the
marketplace today... but mainly it's just heavy profit-taking by
the shorter-term futures traders after gold prices hit 12-month
highs yesterday," said Jim Wyckoff, senior analyst at Kitco
Metals.
Risk assets, including equities and oil prices, rebounded
after the rescue of Credit Suisse calmed nerves about a bigger
banking crisis. That made gold, traditionally used a safe asset
during financial instability, less attractive. All eyes are on the Fed policy decision on Wednesday, with
some top central bank watchers saying it could pause further
rate hikes.
"The surprise to the marketplace would be if the Fed did
nothing and that would be probably significantly bullish for the
metals markets," Wyckoff said.
Markets are pricing in an 13.6% chance the Fed will stand
pat and an 86.4% likelihood of a 25-basis-point hike, according
to the CME FedWatch tool. Higher rates reduce the appeal of
non-yielding gold.
"We could see some marginal selling activity below the
$1,950/oz mark, but expect that the combination of strong
physical demand and resurgent investor flows should keep (gold)
prices from tumbling," TD Securities said in a note.
Holdings of the largest gold-backed exchange traded fund
New York's SPDR Gold Trust have registered
consecutive inflows. In other metals, spot silver fell 1.2% to $22.25 per
ounce, platinum dropped 2% to $968.73 and palladium slid 1.7% to $1,391.14.
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Gold ETF holdings ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Seher Dareen, Swati Verma and Bharat Govind
Gautam in Bengaluru; Editing by Tomasz Janowski and Shilpi
Majumdar)
