Investing.com– Gold prices moved little in early Asian trade on Wednesday, but were underpinned by increased safe haven demand amid renewed fears of a banking crisis and uncertainty over monetary policy before a Federal Reserve rate decision.
The yellow metal rose sharply on Tuesday as U.S. bank stocks faced a flurry of selling, after the government-brokered takeover of First Republic Bank (NYSE:) by JPMorgan Chase & Co (NYSE:) sparked concerns that several other regional U.S. lenders were facing solvency issues.
Regional bank stocks such as PacWest Bancorp (NASDAQ:) and Western Alliance Bancorporation (NYSE:) slumped between 15% and 30%.
The bank rout also came just before the conclusion of a Fed meeting later in the day, where the bank is .
was flat at $2,017.01 an ounce, while rose 0.1% to $2,025.80 an ounce by 21:58 ET (01:58 GMT). Both instruments jumped 1.7% on Tuesday, their biggest intraday gain in nearly a month.
Bullion demand was also supported by increased fears of a U.S. debt default, after Treasury Secretary Janet Yellen warned that the world’s largest economy potentially faces a June 1 deadline to meet its obligations. The warning came as Republican and Democratic lawmakers clashed over how much to raise the Congressional debt limit.
But uncertainty before the Fed meeting limited gains in gold. While the central bank is widely expected to hike interest rates, markets are uncertain over a potential pause in the Fed’s year-long rate hike cycle.
is still trending well above the Fed’s target range, and the central bank has given scan indication that it plans to taper its hawkish stance.
Still, gold and other non-yielding assets could see increased support if the Fed announces a pause, given that rising interest rates ramp up the opportunity cost of holding such assets.
Other precious metals were little changed on Wednesday, with down 0.1%, while rose 0.1%.
Among industrial metals, copper prices fell further after tumbling nearly 1.8% in the prior session following a string of weak manufacturing activity readings from across the globe.
fell 0.2% to $3.8575 a pound.
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