Gold holds above $2,000 as Fed rate decision nears

Gold prices held above the key $2,000 level on Wednesday as investors turned their attention to the U.S. Federal Reserve's interest rate decision due later in the day.

 

Spot gold held steady at $2,015.61 an ounce after rising more than 1 percent in the previous session as yields fell amid renewed fears of contagion in the U.S. banking sector. U.S. gold futures rose 0.1 percent to $2,024.80.

 

The Fed's rate decision will be announced at 18:00 GMT. Investors largely expect the U.S. central bank to raise interest rates by 25 basis points, but are looking for clues about its next moves.

 

"If the Fed surprises by pausing, it would signal a deepening banking crisis and likely lead to a rise in gold," said Clifford Bennett, chief economist at ACY Securities.

 

Gold is known as a hedge against inflation and economic shocks, but rising rates tend to make the zero-yield asset less attractive.

 

Data released Tuesday showed that U.S. job openings fell in March and layoffs rose to their highest level in more than two years, suggesting some softening in the labor market.

 

If uncertainty over the banking crisis and fears of a possible U.S. debt default persist, the dollar will lose its luster and more light will fall on gold, Bennett said.

 

On Tuesday, top U.S. Senate Republicans urged President Joe Biden to accept their party's proposed debt-restraint package or make a counter-proposal, and a top Democrat said the Senate could try to advance a "clean" debt-restraint increase next week.

 

On the physical front, April gold sales at the Perth Mint were down more than 6 percent month-over-month, while silver sales reached a six-month peak.