Gold edges above $4,330 as Fed holds, central banks underpin demand

Gold edged higher to $4,337.22 an ounce, supported by the Federal Reserve's decision to hold rates steady and continued buying from central banks.

"Improved market confidence, due to easing concerns over energy supply disruptions, higher inflation, and interest rates, is creating a better environment for gold," Zaheer Anwari, chief executive officer of The Revacy Fund, said.

Spot gold was up 0.2% as of early Asian trade, after touching a one-week high of $4,370.82 on Monday. The Fed held its benchmark rate at 3.5% to 3.75% at the conclusion of its June 16-17 meeting, the first chaired by Kevin Warsh. The dot plot removed the last remaining projection for a rate cut in 2026, and futures traders now price a 66% chance of at least one hike before year-end, according to the CME FedWatch tool. The 10-year Treasury yield traded near 4.47%, while the 30-year approached 4.97%.

"At this point, with Brent crude down more than 30% from its high, and the Fed's hawkish repricing having pressured bullion to a fair extent, the balance of risks is skewed toward a more bullish case for gold," Maybank analysts said in a research note. They see resistance at $4,900 an ounce and then at $5,020 an ounce, based on chart levels.

Lower oil prices are providing additional relief. Brent crude has fallen to near a three-month low on expectations of increased Iranian supply following a preliminary U.S.-Iran agreement, which would allow Tehran to sell oil once signed. The drop in energy costs reduces inflation pressure and supports gold by easing the case for aggressive rate hikes. A sustained move lower in oil prices could bring relief to U.S. Treasurys as well as emerging-market currencies, which could in turn support a more sustained move higher in gold, Maybank analysts said.

Central banks continue to provide structural demand. "Over the longer term, structural support is expected to persist, driven by ongoing Asian demand and continued central bank purchases as a hedge against geopolitical and policy risks," Westpac analysts wrote in a research note. Anwari sees stable support around $4,000 an ounce.

The Bank of Japan's rate hike has supported Japanese bond yields, which could limit gold's gains by increasing the opportunity cost of holding non-yielding assets. On the Multi Commodity Exchange of India, gold futures traded above 1.53 lakh rupees per 10 grams.

Among other precious metals, spot silver fell 0.2% to $70.05 an ounce, platinum lost 0.7% to $1,792.05, and palladium was down 0.8% at $1,341.23.

This article is for informational purposes only and does not constitute investment advice.