GOLD PRICES DROP TO FOUR-WEEK LOW AMID US FED POLICY SPECULATION

Gold prices on Wednesday (May 1) tumbled to their lowest level in almost four weeks as investors eagerly awaited the outcome of the US Federal Reserve's policy decision.

Spot gold slipped by 0.1% to $2,284.44 per ounce as of 0436 GMT, marking its lowest point since April 5, according to news agency Reuters.

This decline follows a 2% drop on Tuesday, triggered by a surge in the dollar and US treasury yields.

The precious metal has shed more than $140 since reaching a record high of $2,431.29 on April 12.

Meanwhile, US gold futures were down by 0.4% at $2,293.10 per ounce.

In domestic markets, the cost of 10 grams of gold hovered around ₹72,000 s of May 1.

Pure 24-carat gold was priced at ₹72,590 per 10 grams, while 22-carat gold maintained a value of approximately ₹66,540 per 10 grams.

"Inflation readings have shown no progress at all so far in 2024. The Fed will have to backtrack and pivot more towards a more hawkish message, and the gold market is discounting that," Analyst Edward Meir from Marex was quoted as saying in the Reuters report.

All eyes are now on the US central bank's policy decision, followed by Chair Jerome Powell's remarks.

The Fed is widely expected to maintain its benchmark interest rate at 5.25% to 5.5%.

Meir warned, "If Powell strikes a hawkish tone, prices could fall $30 or $40 more between today and the next day."

Gold, traditionally viewed as an inflation hedge, faces headwinds from elevated interest rates, which diminish the appeal of holding non-yielding assets.

The prospect of sustained higher interest rates spells trouble for gold, as it amplifies the opportunity cost of investing in the yellow metal.

Diminishing expectations of rate cuts have driven gold prices down from their recent record highs over the past fortnight.

For investors, experts suggest adding gold to the portfolio as it can help diversify risk.

Gold is often used as a hedge against economic uncertainty and inflation as it tends to have a low correlation with other asset classes like stocks and bonds.

If investors are looking to diversify investments and reduce overall portfolio risk, allocating a portion to gold may be beneficial.

2024-05-01T06:18:02Z dg43tfdfdgfd