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Gold holds near a four-week low, Fed in focus


Bullion prices have dropped over $140 after reaching a record high of $2,431.29 on April 12

Gold prices held near a four-week low on Wednesday ahead of a U.S. Federal Reserve policy decision that could shed more light on the central bank’s rate path after strong U.S. economic data in the recent weeks.

Spot gold was flat at $2,285.69 per ounce as of 0829 GMT, after reaching its lowest level since April 5 earlier in the session. Prices dropped 2% on Tuesday due to an uptick in the dollar and U.S. Treasury yields.

Bullion prices have dropped over $140 after reaching a record high of $2,431.29 on April 12.

U.S. gold futures were 0.3% lower at $2,296.30 per ounce.

Gold was unwinding overbought conditions and is now oversold so it is likely that there is some technical bargain hunting appearing, according to StoneX analyst Rhona O’Connell who expected a near-term consolidation in prices.

Focus is now on the U.S. central bank’s policy decision due at 1800 GMT followed by remarks from Chairman Jerome Powell. The Federal Reserve is expected to hold its benchmark interest rate steady at 5.25% to 5.5%.

Financial markets have already pared back bets on the amount on U.S. policy easing likely this year and are now only fully pricing in one U.S. rate cut before December.

Unlikely that Powell can say much that would pressure prices lower given that the markets are now pricing in somewhere between one or two rate cuts this year, and with the strong US labour markets it looks more like one than two, O’Connell said.

Data on Tuesday showed that U.S. labour costs rose more than expected in Q1, chiming with a recent series of strong inflation data.

Gold is known as an inflation hedge but higher interest rates reduce the appeal of holding the non-yielding asset.

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