Gold almost unchanged as traders await Fed decision

Gold prices were almost unchanged last week as investors awaited an interest rate decision by the US Federal Reserve this week. The afternoon fixing on Friday in London was $1,923.05 an ounce, compared with $1,924.90 a week earlier. Thai selling prices were quoted at 29,950 baht per baht-weight (15.2 grammes), up 100 baht from the previous week.

Gold rallied on Friday but gave up gains after data showed US consumer spending fell in December, even as the core personal consumer expenditure index rose 0.3%.

“[The Fed] needs to be convinced and their favourite indicators are showing inflation is cooling, but I think there still needs to be a bit more work done,” said Edward Moya, senior market analyst at the currency brokerage Oanda.

Fed policymakers have signalled they expect rates ultimately to go a bit higher — to just over 5%. Most traders expect a 25-basis-point rate hike this week.

The market is still good for gold as a recession would lift demand, and bullion could also thrive once rate hikes decrease or stop, Moya added.

In the physical market, dealers in India offered the steepest discounts in 10 months to lure customers, as a sharp rally in local prices squeezed demand.

Local gold prices hit an all-time high of 57,125 rupees ($700) per 10 grammes, pushing discounts to $42 an ounce over official domestic prices, versus $24 a week earlier.

“Consumers are struggling to adjust to higher prices. Demand is very weak for the past few weeks even as the wedding season has started,” said Prithviraj Kothari, managing director of RiddiSiddhi Bullions.

Dealers and jewellers have been postponing purchases on hopes the government would cut import duty to deter smuggling in the upcoming budget on Wednesday, said a Mumbai-based dealer.

Trading in China was closed for the Lunar New Year holiday.