Gold futures prices slipped Wednesday as narrow, subdued trading persists ahead of the afternoon Federal Reserve decision that is expected to yield a third interest-rate increase of the year--a potentially negative development for gold because it tends to lift the dollar and U.S. bond yields.
December gold fell $2.90, or 0.2%, at $1,202.10 an ounce. The dollar index rose 0.2% at 94.30.
Gold is sensitive to higher rates because they push up U.S. bond yields, reducing the attraction of nonyielding bullion, and tend to boost the dollar, which makes gold more expensive for buyers with other currencies. Gold prices based on the most-active contracts have declined by 8% so far in 2018 while the dollar index is up about 2.2%, both moves largely linked to a tightening Fed.
Fed policy makers’ two-day meeting ends with a statement to be issued at 2 p.m. Eastern time, followed by Chairman Jerome Powell’s news conference at 2:30 p.m. The market is pricing in over a 90% chance of a quarter-point rate increase and is penciling in a total four rate increases in 2018, although investors are anxious to hear from the Fed on whether a December rate hike and more moves into early 2019 are still as likely as earlier commentary insinuated.
“If we break (technical resistance at) $1,205-$1,215, at a minimum we could go to $1,240,” said Fawad Razaqzada, analyst at Forex.com, adding that the gold market would be more surprised by a dovish Fed.
Meanwhile, December silver was little changed at $14.495 an ounce.
The popular SPDR Gold Trust (GLD) fell 0.2%, while the iShares Silver Trust (SLV) rose 0.2%. The VanEck Vectors Gold Miners ETF(GDX) added 0.2%.
Write to Rachel Koning Beals; 415-439-6400; [email protected]