Gold advances as traders weigh US-China tensions, hawkish Fed

Gold climbed as the dollar and bond yields retreated, with investors assessing US-China tensions and an apparent hawkish turn from the Federal Reserve.

Bullion has been drawing some haven support amid the ongoing geopolitical risks. While anxiety has eased slightly in markets, traders are still monitoring the latest developments, especially with US House Speaker Nancy Pelosi’s visit to Taiwan.

Bullion had dropped 0.7 per cent on Tuesday, as Fed officials pushed back against a narrative in financial markets over the past week that the central bank is likely to pivot away from tightening to prevent a sharp slowdown.

Three Fed district-bank presidents highlighted in remarks on Tuesday that there was no sign yet of an easing in inflation, which had traders recalibrating their views on the likely pace of rate increases and on whether the Fed will cut them in early 2023.

“Disappointing economic data has made a case for the Fed to slow down the rate hikes,” said Madhavi Mehta, a senior analyst at Kotak Securities. “However, Fed officials have indicated that getting inflation under control is still a priority. We are in a new phase of uncertainty now.”

Spot gold climbed 0.5 per cent to $1,769.06 an ounce as of 12:38 pm in Singapore. It rose to $1,788.05 on Tuesday, the highest intraday level since July 5. The Bloomberg Dollar Spot Index fell 0.2 per cent, after jumping 0.8 per cent in the previous session. Silver, platinum and palladium all rose.