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Some investors still holding onto gold - analyst
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Asian shares surge on Wednesday
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Gold could pierce all-time highs this year- MKS PAMP
(Updates prices)
By Kavya Guduru
March 29 (Reuters) - Prices of safe-haven gold dropped
on Wednesday as easing fears of a further contagion from the
global banking crisis whetted appetite for riskier assets.
Spot gold was trading 0.6% lower at $1,961.80 per
ounce, as of 0749 GMT, after rising 1% on Tuesday. U.S. gold
futures slipped 0.5% to $1,963.10.
"We've seen a natural retracement ... gold is pulling back
after a failed 'bid' to break above $1,975," said Matt Simpson,
senior market analyst at City Index.
But some investors "still seem to be holding onto gold 'just
in case' there's another skeleton or two lurking in the closet,"
Simpson said.
The dollar firmed, making bullion expensive for overseas buyers. Asian shares surged on Wednesday. While gold would "ultimately" be supported by financial uncertainty, prices could become more volatile over coming weeks if inflation and U.S. economic data stay elevated, Simpson said. Data on Tuesday showed U.S. consumer confidence unexpectedly increased in March, while February's U.S. trade deficit in goods widened modestly.
Analysts at Macquarie, in a note, said they expect the Fed to "prioritise bringing inflation back to target – with one more rate hike and then no cuts in the early stages of economic contraction," resulting in cyclically weaker gold prices through the second half of 2023. The opportunity cost of holding non-yielding gold rises when interest rates are increased.
Markets are pricing in a nearly 42% chance of a 25-basis-point Fed hike in May. In contrast, refiner and trader MKS PAMP said in a note that "the Fed will have to choose between higher inflation, a harder landing or financial instability- all outcomes will keep safe havens in play," likely prompting gold to retest and pierce all time highs ($2,070/oz) this year. Silver fell 0.5% to $23.15 per ounce, platinum eased 0.1% to $962.05 and palladium was down 0.3% at $1,414.64.
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(Reporting by Kavya Guduru in Bengaluru; Editing by Sherry
Jacob-Phillips and Sonia Cheema)
