Gold prices experienced a slight decline on Wednesday as traders remained cautious ahead of the Federal Reserve’s interest rate decision later in the day. The recent uptick in inflation has raised concerns of a potentially more hawkish stance from the central bank.
The heightened uncertainty leading up to the Fed meeting prompted some buying interest in gold during recent sessions, helping to maintain prices comfortably above the $1,900 per ounce mark. However, the strength of the U.S. dollar, trading near six-month highs, limited the extent of these gains.
As of 00:28 ET (04:28 GMT), spot gold fell by 0.1% to $1,930.22 per ounce, while gold futures set to expire in December registered a similar 0.1% drop, reaching $1,950.95 per ounce.
Gold’s performance was further hampered by the rise in U.S. Treasury yields, as market participants positioned themselves for a potentially hawkish outlook from the Federal Reserve.
The Fed is widely expected to maintain interest rates at their current levels at the conclusion of its two-day meeting later on Wednesday. However, the recent surge in inflation, driven primarily by higher oil prices, may lead to a more hawkish tone from the central bank. The Fed has indicated the possibility of at least one more rate hike this year, which it could signal during its announcement.
Even if the Fed signals no further rate hikes, it is expected to keep interest rates at levels not seen in over two decades until at least mid-2024, which presents a subdued outlook for gold and other non-yielding assets. High interest rates increase the opportunity cost of investing in gold, a factor that has weighed on the precious metal throughout the past year.
Beyond the Federal Reserve’s decision, interest rate determinations in the UK and Japan are also scheduled for later this week.
Copper Prices Dip Amid Dollar Strength and China Uncertainty
In the realm of industrial metals, copper prices experienced a modest decline on Wednesday, extending their losses for the fourth consecutive session. This decline came amidst pressure from the strengthening U.S. dollar and uncertainty surrounding major importer China.
Copper futures dipped by 0.3%, reaching $3.7428 per pound.
The People’s Bank of China, as widely anticipated, kept its key loan prime rates at record lows on Wednesday. However, the central bank was also expected to continue its liquidity measures to support a slowing economic recovery.
The focus in the coming week will be on Chinese business activity data for September, following August readings that showed some signs of improvement. Nonetheless, concerns persist regarding an economic slowdown in China, which has had a significant impact on copper prices over the past year.
