Gold prices remained relatively stable on Wednesday as investors exercised caution in anticipation of the Federal Reserve’s policy decision. The U.S. central bank is widely expected to maintain current interest rates, but the prospect of future rate hikes later in the year looms large.
At 0705 GMT, spot gold was trading at $1,930.19 per ounce, holding just below its highest level since September 5th, which it had reached on Tuesday. Meanwhile, U.S. gold futures experienced a marginal decline of 0.1%, settling at $1,950.90.
The Federal Reserve’s rate-setting policy committee is scheduled to release a new policy statement and announce its interest rate decision at 1800 GMT. Following this, Fed Chair Jerome Powell is set to hold a press conference at 1830 GMT.
Yeap Jun Rong, a market strategist at IG, remarked, “Thus far, real Treasury yields have remained elevated in the lead-up to the upcoming Fed meeting, which reflects broad positioning in place for a hawkish-pause scenario from the Fed and kept gold prices on some caution.” He added, “The focus ahead will be on whether the fresh economic projections are able to provide the conviction that the Fed’s view for additional tightening will be followed through.”
Surging oil prices have added to inflationary pressures, leading to expectations that the U.S. central bank will maintain higher interest rates for a longer period. Treasury Secretary Janet Yellen commented on Tuesday that U.S. growth needed to slow to a pace more in line with its potential rate to bring inflation back to target levels, as the economy was operating at full employment.
NAB Commodities Research noted, “A more hawkish Fed on the back of stronger-than-expected August U.S. CPI and PPI data released last week should see downside risk to gold prices.” They further suggested that spot gold might retrace into a narrow range of $1,917 to $1,921 per ounce, as it failed to break through a resistance zone of $1,933 to $1,935.
In the precious metals market, spot silver experienced a slight drop of 0.2%, trading at $23.19 per ounce, while platinum fell 0.3% to $936.38, and palladium remained steady at $1,259.62.
