Could Federal Reserve rate action jolt gold price today? Here's what experts suggest

The rally in gold — with the international benchmark rate up almost seven per cent so far in 2023 — has been backed by turmoil in banking shares thanks to fresh problems at Credit Suisse, the sudden collapse of Silicon Valley Bank (SVB) and weakness in the rupee against the US dollar.

Gold prices could be impacted as the US central bank is widely expected to hike the key lending rate by 25 basis points on March 22, Pic- Reuters

Gold prices have rallied to unprecedented levels, with the domestic rate hitting the Rs 60,000 per 10 grams mark for the first time ever, all ahead of a key rate decision by the Fed due on Wednesday.

The rally in gold — with the international benchmark rate up almost seven per cent so far in 2023 — has been backed by turmoil in banking shares thanks to fresh problems at Credit Suisse, the sudden collapse of Silicon Valley Bank (SVB) and weakness in the rupee against the US dollar.

Typically, equities and gold share an inverse relationship, with a dwindling appetite for risk among investors boosting the appeal of the yellow metal as an investment bet.

All eyes are on an upcoming Fed rate decision, due at 11:30 pm India time, amid its continuing fight to curb inflation without hurting economic growth.

The US central bank is widely expected to hike the key lending rate by 25 basis points on March 22.

Here's what experts make of the possible impact of the upcoming Fed event on the price of gold and what they suggest:

A hike of 25 basis points or 50 basis points will lead to the key lending rates in the US peaking out, and trigger a rally in gold, Anuj Gupta, VP at IIFL Securities, told Zee Business.

However, a harsher hike, of 75 basis points, will lead to correction in the yellow metal, Gupta warned.

The Fed's statement will be important, as it may give momentum to the money markets as well as gold, he said.

What if the Fed pauses the key rate today?

According to Jigar Dharamshi, Senior Analyst-Commodities and Currency at Motilal Oswal, a pause by the Fed will trigger buying in safe-haven assets, such as gold.

Gold April Futures on MCX, YTD chart: