Gold languishes near 29-month low in run-up to Fed meeting

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Gold prices weakened on Monday, back

toward a 29-month low hit on Friday, as the dollar and Treasury

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yields firmed on expectations the U.S. Federal Reserve will

deliver a steep interest rate hike when it meets this week.

Spot gold was down 0.3% at $1,670.72 an ounce by 1:48

p.m. ET (1748 GMT), holding above its lowest since April 2020

hit on Friday.

U.S. gold futures settled 0.3% lower at $1,678.20.

“(Gold) is still hanging around its lows and a big part of

this is anticipation of the Fed announcement on Wednesday,” said

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Daniel Pavilonis, senior market strategist at RJO Futures,

adding that higher Treasury yields were also pressuring prices.

The Fed, at the conclusion of its two-day policy meeting on

Wednesday, is expected to raise interest rates by 75 basis

points to combat stubbornly-high inflation, with markets even

seeing a 20% chance for a 100 bps increase.

Concerns about surging inflation have also prompted other

central banks to tighten monetary policy.

Although gold is considered a hedge against inflation,

higher interest rates lift the opportunity cost of holding

zero-yield bullion.

The dollar held close to two-decade highs, making

greenback-priced bullion more expensive for overseas buyers.

Benchmark 10-year U.S. Treasury yields rose to

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their highest in over 11 years.

“What is driving the hesitation for scaling into a long-term

position with gold is that investors are not convinced that even

when the Fed pauses, that might not guarantee they are done

hiking (interest rates),” Edward Moya, senior analyst with

OANDA, said in a note.

Elsewhere, silver lost 1.2% to $19.32 an ounce, while

platinum rose 1% to $915.91 and palladium gained

4.1% to $2,222.19.

The bullion market in London – the world’s biggest trade

center for physical gold – was closed for Queen Elizabeth’s

funeral which limited trade volumes on Monday.

(Reporting by Kavya Guduru in Bengaluru; Editing by Jonathan

Oatis and Mark Potter)



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