Gold stabilized due to inflation, Ukraine fears opposition to US rate hike bets

Gold prices remained stable after the publication on Wednesday of the minutes of the March meeting of the US Federal Reserve, as the attractiveness of the metal as a safe haven and hedge for inflation leveled the expected increase in the rate of the US central bank by 50 basis points.

By 3:08 p.m. ET, spot gold had changed little at $1,923.50 an ounce, while U.S. gold futures were down 0.2% at $1,923.10.

"You'll see gold trade a little lower between today and the close of trading, but there wasn't much surprise in those (Fed's) minutes," said Bob Haberkorn, senior market strategist at RJO Futures, adding that the downside opportunities for gold are limited.

"Markets were expecting a half-point rate hike."

Fed officials noted that one or more 50 bp rate hikes in the target range may be appropriate for future meetings, the next of which will be held in May, especially if inflationary pressures remain elevated or intensify, according to minutes of the March 15-16 meeting.

The Fed raised rates by 25 basis points after the March meeting, and the minutes showed that the economic consequences of Russia's invasion of Ukraine in late February did not allow for a 50 basis point hike.

Rising U.S. interest rates and rising yields increase the opportunity cost of owning bullion, which is also used as a hedge against rising inflation.

However, gold prices could continue to rise over the next two quarters as the Fed fails to raise rates quickly enough to combat high inflation, Haberkorn added.

The dollar jumped to a nearly two-year high, which reduced the attractiveness of gold.

"There are still a number of things that can trigger a new rally in gold. Inflation continues to rise above current expectations, negotiations between Ukraine and Russia have failed or recessioned," said Craig Earlam, senior market analyst at OANDA.

Among other precious metals, silver rose 0.4% to $24.40 an ounce, platinum fell 1.5% to $953.88, and palladium fell 2.2% to $2,189.43.