Gold Near Two-Week Low Ahead of Fed Meeting as Platinum Climbs

  • Morgan Stanley cites lack of inflation among bearish drivers
  • Bullion-backed ETF holdings resume uptrend to near 2014 highs

Gold held near a two-week low as investors waited for the Federal Reserve to signal the path of U.S. interest rates.

Bullion for immediate delivery swung between gains and losses, rising less than 0.1 percent to $1,232.54 an ounce at 10:26 a.m. in New York, after dropping on Tuesday to $1,225.77, the lowest since March 2, according to Bloomberg generic pricing. The metal remains 16 percent higher this year after investors scaled back expectations of tighter monetary policy.

Fed officials are expected to reduce the number of rate hikes they see in 2016 and leave the target range for the federal funds rate unchanged after their two-day gathering in Washington. Traders are pricing in a 57 percent chance that the Fed will raise rates in June, up from 6 percent a month ago, according to Fed fund futures data compiled by Bloomberg. Higher rates tend to reduce the appeal of bullion because the metal doesn’t pay interest like other assets.

“Fed meetings are always a major focal point for the market, but few expect policy changes today,” Bernard Dahdah, a commodities analyst at Natixis SA, said by phone from London. “Of greater importance is their take on future policy and on global economic conditions.”

Morgan Stanley raised its average gold estimate by 8 percent to $1,173 an ounce for 2016, still below the current level.

A government report today showed consumer prices in the U.S. excluding food and fuel climbed more than forecast in February for a second month, adding to signs inflation is moving closer to the Fed’s target. The overall cost of living fell amid cheaper fuel.

Holdings in exchange-traded funds backed by gold rose 0.1 percent to 1,734.6 tons on Tuesday, near the highest level since July 2014, according to data compiled by Bloomberg.

In other metals:

  • Spot silver rose 0.2% to $15.304 an ounce
  • Platinum climbed 0.7 percent to $964.20 an ounce, ending a six-day losing streak, the longest since November
  • Palladium added 0.9 percent to $573.30 an ounce
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