Gold prices slip as dollar firms ahead of US Fed rate decision

London — Gold prices fell on Wednesday as the dollar strengthened ahead of the results of a US Federal Reserve meeting later in the day that is expected to raise US interest rates and hint at the outlook for future rate increases.

Gold is sensitive to higher interest rates because they tend to boost the dollar, making gold more expensive for buyers with other currencies. They also push up US bond yields, reducing the attraction of non-yielding bullion.

A Fed rate hike — the third this year — in an announcement at 6pm GMT is anticipated and is therefore unlikely to shift gold prices, said FOREX.com analyst Fawad Razaqzada. Markets will, instead, be looking to the Fed’s economic and interest-rate projections and a news conference by Fed chair Jerome Powell for something to move gold from its recent trading range of $1,190 to $1,210 an ounce.

“If the Fed appears more dovish than expected we may see a break-out for gold,” Razaqzada said, adding that without a surprise, gold is unlikely to move much. “If we break [technical resistance at] $1,205 to $1,215, at a minimum we could go to $1,240.” 

Spot gold was down 0.5% at $1,195.04 an ounce at 12.31pm GMT, remaining close to a 19-month low of $1,159.96 reached last month. US gold futures were also 0.5% lower at $1,199.10 an ounce. Gold has fallen more than 12% from an April high as a vibrant US economy, expectations of higher US interest rates, and fears of a global trade war have caused the dollar to rally. Investors looking for a safe place to park assets have preferred the US currency to bullion, undermining gold’s traditional role as a safe haven, while speculators have ramped up bets that gold prices will fall.

The dollar was sightly stronger on Wednesday against a basket of major currencies and is up more than 5% since April. Analysts at Commerzbank said gold is stuck beneath technical resistance at its 55-day moving average at $1,207.76 and its four-month downtrend at $1,220. They said prices will likely move lower and that their long-term outlook has become more negative since gold broke below its 2005-2018 uptrend line, now about $1,215.

In other precious metals, silver was down 0.4% at $14.36 an ounce after touching a three-week high on Tuesday. Platinum had gained 0.2% to $824.20 an ounce and palladium was unchanged at $1,060.97 an ounce, near an eight-month high of $1,068.50 reached in the previous session.

Reuters