Gold dips as Fed’s Powell stays hawkish after holding rates

By Ashitha Shivaprasad and Deep Kaushik Vakil

(Reuters) – Gold prices fell on Wednesday after the U.S. central bank announced its widely expected decision to leave interest rates unchanged and Chair Jerome Powell said the question of rate cuts is not on their radar right now.

Spot gold was down 0.3% to $1,976.39 per ounce by 3:10 p.m. ET (1910 GMT). U.S. gold futures settled down 0.3% at $1,987.50.

The Federal Reserve held interest rates steady but left the door open to a further increase in borrowing costs in a policy statement that acknowledged the U.S. economy’s surprising strength but also nodded to tighter financial conditions.

“While the macro shadows (from ongoing dollar strength, growing expectations of higher-for-longer rates and inflationary pressures easing) persist after the Fed meeting, the geopolitical premium has more than offset them,” said Standard Chartered analyst Suki Cooper.

Fed Chair Powell said the U.S. central bank is not thinking about lowering rates right now.

This week, gold prices have slightly pulled back after surpassing the key $2,000 level on Friday. Bullion rose over 7% in October, helped by strong safe-haven demand due to growing unrest in the Middle East.

After the Fed’s decision, the U.S. dollar held gains while benchmark 10-year U.S. Treasury yields fell to two-week lows. [USD/] [US/]

Traders added to bets that the central bank is done raising its policy rate and will start cutting rates by June of next year.

Higher interest rates raise the opportunity cost of holding gold.

“A combination of eventually lower rates, a waning U.S. dollar, and strong official sector buying should help gold longer term,” said Bart Melek, head of commodity strategies at TD Securities.

Investors also looked to the October non-farm payrolls report due on Friday.

Silver dropped 0.6% to $22.77 per ounce, platinum slipped 1.2% to $922.24, while palladium lost 0.5% to $1,109.03.

(Reporting by Ashitha Shivaprasad, Deep Vakil and Sherin Elizabeth Varghese in Bengaluru; Editing by Emelia Sithole-Matarise, Shinjini Ganguli and Aurora Ellis)