Gold loses gains on lower rate cut bets after Fed ruling

By Anjana Anil and Rahul Paswan

(Reuters) – Gold prices gave up gains on Wednesday after the U.S. Federal Reserve said it plans only one interest rate cut this year, citing still-high inflation.

Spot gold rose 0.3 percent to $2,322.46 an ounce by 3:18 p.m. ET (7:18 p.m. GMT), after rising as much as 1 percent earlier in the day, helped by a surprisingly weak U.S. consumer price report.

US gold futures for delivery in August closed 1.2 percent higher at $2,354.8.

The U.S. Federal Reserve left interest rates unchanged on Wednesday, while policymakers indicated they expect only a single rate cut in 2024.

“The Fed neither cut nor raised interest rates, so investors switched to less risky assets like gold. This pushed prices very high and led to profit-taking,” said Jeffrey Christian, managing partner of the CPM Group.

Fed Chairman Jerome Powell said the Fed's inflation outlook was “a fairly conservative forecast” that may not be confirmed by future data and could be subject to revision.

Powell added that officials welcomed better-than-expected consumer price index data for inflation.

“Powell's acknowledgement that the FOMC had the opportunity to change its forecasts after seeing today's data and his emphasis that this was ONE good report sends a clear message: 'Don't send out the pivot party invitations yet,'” said Tai Wong, an independent metals trader based in New York.

“Gold continues to trade along with employment and inflation data.”

The consumer price index remained unchanged in May compared to the previous month, below expectations for a 0.1 percent increase. Core prices rose by 0.2 percent, also below economists' forecasts of a 0.3 percent increase.

The dollar index lost 0.6 percent, recovering some of its earlier losses following the Fed's decision to cut interest rates. [USD/]

Bets on a rate cut at the Fed meeting in September fell from around 71% before the Fed decision was announced to around 64%.

Spot silver rose 1.5% to $29.69 an ounce, platinum gained 1.2% to $962.85 and palladium rose 2.6% to $907.01.

(Reporting by Anjana Anil and Rahul Paswan in Bengaluru; Editing by Paul Simao, Nick Zieminski, Shreya Biswas and Vijay Kishore)