Gold prices were set to post gains for a third straight month, supported by strong central bank demand and safe-haven demand, with focus shifting to this week's U.S. Federal Reserve meeting to decide on interest rates, where policymakers are expected to adopt a hawkish tone.
The precious metal was trading steady at around $2,330 an ounce in early Asian trading, having risen nearly 5% over the month, with traders awaiting the Federal Open Market Committee meeting on Wednesday.
US Federal Reserve officials are expected to move towards tightening monetary policy after inflation data came in higher than expected in recent months, with the central bank likely to be forced to backtrack on Fed Chairman Jerome Powell's hints of faster rate cuts last December.
Citi expects gold price to reach $3,000 on strong demand
The expected decision of the Federal Reserve
Swap traders now price in at most two Fed cuts by the end of the year, the fewest cuts expected since November 2023. Higher interest rates typically hurt gold because it doesn’t yield a return.
But despite the Fed’s delayed timetable for rate cuts, the precious metal has risen more than 13% this year, amid strong buying by central banks, strong demand from Asian markets, especially China, and rising geopolitical tensions from Ukraine to the Middle East.
Gold has also found some support in recent days from a weaker U.S. dollar, which fell on Monday after the yen strengthened, amid speculation that the Japanese government could intervene to support its struggling currency for the first time since 2022. Any further action could weigh on the U.S. dollar, making gold more attractive to investors as the metal is priced in that currency.
Spot gold was little changed at $2,334.96 an ounce at 9:27 a.m. Singapore time. The Bloomberg Dollar Spot Index was up 0.1%, after falling 0.4% yesterday. Palladium fell, while platinum and silver were steady.
