Gold prices held near their highest levels in a week in early Asian trading on Thursday after the U.S. Federal Reserve delivered a widely expected interest rate hike and investors digested fairly balanced comments from Chair Jerome Powell.
FUNDAMENTALS
* Spot gold was up 0.2% at $1,975.05 per ounce by 0114 GMT, its highest since July 20.
* U.S. gold futures also gained 0.2% to $1,974.70.
* The Fed raised interest rates by a quarter-of-a-percentage point on Wednesday, setting the benchmark overnight interest rate in the 5.25%-5.50% range, and highlighting that another 25 bps hike could be possibly at the September meeting based on a wide range of data.
* Fed Chair Jerome Powell also flagged that the economy still needed to slow and the labour market to weaken for inflation to “credibly” return to the U.S. central bank’s 2% target, yet were no longer forecasting a U.S. recession.
* Gold is highly sensitive to rising interest rates as they increase the opportunity cost of holding non-yielding bullion.
* The dollar and U.S. Treasury yields edged up after having fallen on Wednesday, limiting bullion’s gains.
* On the data front, the United States is expected to report that Q2’s gross domestic product increased at a 1.8% annualised rate, while initial claims for unemployment benefits are expected to have increased 7,000 to a seasonally adjusted 235,000 for the week ended July 22.
* Focus also shifts to policy decisions from the European Central Bank and Bank of Japan due this week, with the ECB expected to raise rates for the ninth time on Thursday and thereafter taking on a “data-dependent” approach instead.
* Spot silver rose 0.3% to $25.00 per ounce, platinum was up 0.6% at $967.06, and palladium gained 0.3% to $1,262.72. DATA/EVENTS (GMT) 1215 EU ECB Refinancing Rate July 1215 EU ECB Deposit Rate July 1230 US Durable Goods June 1230 US GDP Advance Q2 1230 US Initial Jobless Clm Weekly