Gold Prices Today: Yellow metal trades higher clarity awaited on Fed rate-hike cycle

Higher interests increases the opportunity cost of holding the yellow metal.

Gold was trading a tad higher in international and domestic markets on April 25 morning as the market awaited clarity on the US Federal Reserve's interest-rate hike cycle.

Prices declined the previous week on concerns of higher interest rates in the US, which could limit demand for the precious metal. However, in the last two sessions, gold recovered a bit as the dollar slipped.

A weaker dollar makes commodities priced in the greenback cheaper for investors, lifting demand for gold.

The Fed is more than likely to raise interest rates by 25 basis points in its meeting in May. But, the Fed Fund futures prices show that there is a 60 percent probability that the central bank may pause its rate-hike cycle in June.

This optimism of a pause in the hike cycle supported gold prices. Higher interest rates increase the opportunity cost of holding the yellow metal.

However, the Fed itself has not provided any signals that it is going to pause the rate-hike cycle. Bank officials have even said inflation in the country remained high and it may continue on its rate-hike path.

"The uncertainty over the outlook has seen the rally stall just shy of record highs and while traders don’t seem particularly keen to give up on it, the fact that interest rate expectations have become slightly more hawkish recently has made rediscovering momentum challenging," Criag Erlam, senior market analyst at OANDA, UK, said in a note.

At 10.49 am, Comex gold was at $2,003.85 a troy ounce, up 0.2 percent from the previous close. The June gold contract on the Multi Commodity Exchange (MCX) of India was at Rs 60,087 for 10 grams, up 1 percent.

On Comex, gold has support at $1,984-1972 and resistance at $2,014-2,022. On MCX, gold is seen supported at Rs 59,800-59,580 per 10 grams and resistance at Rs 60,220-60,500.

"We suggest buying gold on dips around Rs 59,800 per 10 grams with a stop loss of Rs 59,580 for the target of Rs 60,400," Manoj Kumar Jain, director at Prithvi Finmart, said.

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