Gold rally cools as focus turns to Fed move

Gold continued to decline for the second day on Tuesday after rising above $2,000 an ounce in the last session, as investors turned their attention from the banking crisis to the U.S. Federal Reserve’s interest rate decision.

Spot gold was down 0.6% at $1,966.30 per ounce, as of 1149 GMT, while U.S. gold futures slipped 0.6% to $1,971.10.

The metal had hit $2,009.59 an ounce on Monday, its highest since March 2022 but soon started to retreat.

Bullion has gained over $100 after the collapse of U.S.-based Silicon Valley Bank earlier this month, as investors scrambled for the safe haven.

European shares rose nearly 1%, with banking stocks leading the recovery, following a raft of measures to stabilise the sector, while investors hoped for less aggressive moves by the Fed. [.EU]

There is some caution in the market ahead of the Fed rate decision, said Michael Hewson, chief market analyst at CMC Markets.

According to the CME FedWatch tool, markets are pricing in a 16.6% chance that the Fed will stand pat at the end of its March 21-22 meeting, with a 83.4% chance of a 25 basis points (bps) hike. If the Fed manages to dampen rate cut expectations, gold is likely to fall, otherwise another rise towards the $2,000 mark is on the cards, Commerzbank analysts wrote.

Lower interest rates make non-yielding bullion more attractive by reducing the opportunity cost of holding it.

“Looking at the technical picture, gold could experience a technical pullback towards $1,955 before bulls take further action,” said Lukman Otunuga, senior research analyst at FXTM in a note.

Benchmark U.S. 10-year Treasury yields ticked up, pressuring gold further. [US/]

Spot silver fell 0.3% to $22.46 per ounce, platinum lost 1.1% at $977.57 and palladium was 0.8% lower at $1,403.48.