PRECIOUS-Gold prices steady ahead of Fed rate decision
September 26, 2018
Gold prices held steady on Wednesday as investors were cautious ahead of the conclusion of U.S. Federal Reserve’s two-day meeting, where policymakers are expected to raise interest rates for the third time this year.
Spot gold was little-changed at $1,200.43 per ounce, as of 0712 GMT, having moved in a narrow $4 range during the session and testing key resistance at $1,200.
U.S. gold futures were flat at $1,204.70 an ounce.
“People are waiting for cues from the Fed ... I think the Fed will stay the course. But they could mention that the trade war (between China and United States) could impact growth,” National Australia Bank economist John Sharma said.
The Fed will end its policy meeting later on Wednesday at which it is expected to raise interest rates for the eighth time since late 2015. Investors are also counting on another rate hike before year-end, though the outlook for 2019 is less clear.
“The Fed may incite recent softness in housing and auto sales, as well as a rather mixed “Beige Book” survey out last week that could conceivably justify moderation in its rate outlook,” INTL FCStone analyst Edward Meir said.
“We think the dollar will weaken post statement, and say this in view of the fact that it has been progressively selling off ahead of the Fed meeting, telling us that investors are likely discounting relatively dovish wording.”
A strong dollar makes dollar-priced gold costlier for non-U.S. investors, while rising U.S. interest rates typically deter investors from buying a non-yielding asset such as gold.
The dollar index, which weighs the greenback against a basket of six major currencies, was almost flat at 94.117.
Gold dropped about 12 percent since hitting a peak in April, marred by rising U.S. interest rates and a global trade war that has led investors to choose the dollar as a safe haven rather than gold.
“People are realizing that the trade war is likely going to continue. It is benefiting the U.S. dollar now, but it could affect the U.S. economy as well, hurting the dollar (and boosting gold),” Sharma said.
Among other precious metals, spot palladium slipped 0.3 percent to $1,058.24 an ounce, after marking its highest since late-January at $1,068.50 in the previous session.
Silver rose 0.5 percent at $14.48, moving closer to a more than three-week high of $14.56 reached on Tuesday.