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Gold futures traded marginally lower Wednesday, in a holding pattern ahead of a decision by the Federal Reserve that’s expected to deliver a half percentage point benchmark interest rate hike.
Gold for June delivery
GC00,
GCM22,
on Comex was down $3.20, or 0.2%, at $1,867.60 an ounce. July silver
SIN22,
was off 29 cents, or 1.3%, at $22.37 an ounce.
“While today’s Fed hike of 50 basis points is fully priced in, it would take a decision outside of this expectation to significantly move markets later today,” said Rupert Rowling, market analyst at Kinesis Money, in a note. “For now, gold is left scrabbling for the next support to stave off further drops rather than any hope of it regaining the $1,900 threshold in the short-term.”
“Gold prices are correcting (deeply) and near support of last resort for bullish views,” BofA Global strategists wrote in a Wednesday note.
The Fed is expected to raise the fed-funds rate by 50 basis points, or a half percentage point, while outlining its plan to begin shrinking its nearly $9 trillion balance sheet. The Fed typically moves its benchmark interest rates in quarter-point increments, with its last half-point hike coming in 2000.
“Post FOMC, if gold is above 1835 bullish ideas can be sustained,” the BofA Global team wrote. “If below 1835 then the risk of a double top from peaks at 2078 in August 2020 and March 2022 increases, and so would USD strength.”
The Fed will announce its policy decision at 2 p.m. Eastern, after the regular close for gold. Fed Chairman Jerome Powell will hold a news conference at 2:30 p.m.
See: Fed on track for biggest rate hike since 2000
The outsize move, and investor expectations for more of them in the future, comes as the Fed attempts to rein in inflation running at its hottest since the early 1980s.
The hawkish backdrop has seen gold fall out of favor, Rowling said, after the yellow metal saw a rush of haven-related buying following Russia’s late-February invasion of Ukraine. By now, “investors have priced in the financial risks posed by the conflict and have reduced some of the fear-based trading as a result,” he said.
In other metals trade, July copper
HGN22,
rose 0.7% to $4.31 a pound. July platinum
PLN22,
was up 1.2% at $970.10 an ounce, while June palladium
PAM22,
fell 0.2% to trade at $2,235 an ounce.
