Gold climbs as Fed hints at rate-hike pause

(Reuters) - Gold prices extended gains to a second straight session on Thursday, boosted by a slide in Treasury yields after the U.S. Federal Reserve signalled an end to its monetary tightening cycle might be on the cards.

FILE PHOTO: Ingots of 99.99 percent pure gold are placed in a workroom at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, January 31, 2023. REUTERS/Alexander Manzyuk

Spot gold rose 1.2% to $1,993.09 per ounce by 2:59 p.m. ET (1859 GMT), while U.S. gold futures jumped 2.4% to settle at $1,995.90.

The Fed raised rates by a quarter of a percentage point on Wednesday, but highlighted that it was on the verge of pausing.

If they truly do pause, that’s a green light for the gold market, with it being a quintessential hedge against inflation, said David Meger, director of metals trading at High Ridge Futures, adding that “it’s likely that inflation would remain elevated if they’re unable to raise rates any further”.

Gold hit a one-year high on Monday, breaching the key $2,000 level on safe-haven demand. However, it later ceded some ground as banking sector jitters subsided following the rescue of Credit Suisse.

The outlook still remains positive if the Fed pauses or the banking crisis carries on, analysts say.

Wall Street bank Goldman Sachs hiked its 12-month gold price target to $2,050 an ounce from $1,950, describing it as the best hedge against financial risks.

“A combination of inflation still being at lofty levels, safe haven alternative investment demand, and the weaker dollar - all of these are significant driving factors behind gold’s recent move,” Meger added.

The dollar spent much of the session near early-February lows, making gold cheaper for holders of other currencies. Benchmark U.S. government bond yields eased and improved zero-yield bullion’s allure. [USD/] [US/]

In other metals, spot silver dipped 0.3% to $22.95 per ounce and platinum was up 0.3% at $980.67, while palladium fell 1.6% to $1,427.17.

Reporting by Seher Dareen in Bengaluru; Additional reporting by Bharat Govind Gautam; Editing by Christina Fincher and Shounak Dasgupta