Gold edged higher as investors weighed comments from the Federal Reserve which signaled it will implement further interest-rate increases to contain price pressures, against geopolitical tensions.
Bullion is hovering near a four-week high after rising 0.3% on Wednesday, as market jitters over the fallout from US House Speaker Nancy Pelosi’s visit to Taiwan boosted some haven demand. While some anxiety eased after her trip ended, Taiwan braced for Chinese military drills starting at noon Thursday in six separate areas surrounding the island, although it downplayed the impact on flights and shipping.
Meanwhile, monetary policy remains in focus, with Fed officials pledging that the central bank would continue an aggressive fight to cool an inflation rate that’s at a four-decade high, even if higher rates cause the risk of an economic downturn.
Fed Bank St. Louis President James Bullard said he favors a strategy of “front-loading” big interest-rate hikes, and he wants to end the year at 3.75% to 4%, while his Richmond and Minneapolis counterparts — Thomas Barkin and Neel Kashkari — said the central bank was committed to lowering inflation and a recession could happen.
“The primary driver for gold will be Wall Street’s assessment of how many more massive rate hikes the Fed has left until they enter a period of keeping policy steady,” said Edward Moya, senior market analyst at Oanda Corp. “It looks like the chances of a 75 basis-point rate increase at the September FOMC meeting are very much on the table and that might keep the dollar supported, which should make it hard for gold to rally above the $1,800 level for now,” he said, referring to the policy-setting Federal Open Market Committee.
Spot gold climbed 0.4% to $1 771.62 an ounce as of 12:10 p.m. in Singapore. It rose to $1 788.05 on Tuesday, the highest intraday level since July 5. The Bloomberg Dollar Spot Index was steady. Silver and platinum dropped, while palladium was little changed.