Gold prices fall as bank jitters fade and reduce demand

Spot gold was trading 0.4% lower at $1,966.48 an ounce by 0356 GMT, after rising 1% on Tuesday. US gold futures fell 0.3% to $1,967.50.

“We have seen a natural pullback… gold is pulling back after a failed ‘bid’ to break above $1,975,” said Matt Simpson, senior market analyst at City Index.

But some investors “still seem to be holding on to gold ‘just in case’ there is another skeleton or two lurking in the closet,” he said, and that gold could get another offer ahead of the European session.
The dollar index stabilized, making bullion more expensive for foreign buyers. Asian stocks rose sharply on Wednesday.

While gold would “finally” be supported by financial system uncertainty, prices could become more volatile and find it difficult to choose a “sustainable direction” in the coming weeks if inflation remains elevated and US economic data remains hot, Simpson said.

Data on Tuesday showed that US consumer confidence rose unexpectedly in March, while the US goods trade deficit for February widened modestly.

Macquarie analysts, in a note, said they expect the US. Federal Reserve to “prioritize returning inflation to target, with one more rate hike and then no cuts in the early stages of the economic contraction, which will result in a period of cyclically weaker gold prices through the second half of 2023” .

The opportunity cost of holding gold without yield increases when interest rates are raised to reduce inflation.

Markets are pricing in a nearly 43% probability that fed raising interest rates by 25 basis points in May, according to the CME FedWatch tool.

Spot silver fell 0.2% to $23.20 an ounce, platinum lost 0.5% to $958.65 and palladium was down 0.2% at $1,417.09.