Gold (GC=F) prices dipped on Wednesday morning, as investors looked ahead to the US Federal Reserve’s latest interest rate decision, due to be announced later in the day.
The Fed is widely expected to announce that it will be keeping rates in the current 3.5% to 3.75% range, after it concludes its two-day meeting on Wednesday.
Investors will be listening closely to commentary from Fed chair Jerome Powell in a press conference following the decision, for any clues on the central bank’s outlook for interest rates in the months to come.
Expectations for further rate cuts this year have been dampened by concerns about a resurgence in inflation, as a result of surging oil prices due to disruption to flows because of the conflict in the Middle East.
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The prospect of interest rates remaining elevated tends to dent the appeal of gold (GC=F), as a non-yielding asset. Gold futures edged 0.2% lower to $4,997.40 per ounce at the time of writing on Wednesday, while spot gold also fell by the same margin to $4,994.83.
ING head of commodities strategy Warren Patternson and commodities strategist Ewa Manthey said: “Gold is trading in a narrow range as the US‑Israeli conflict with Iran drags into a third week. A firmer US dollar and higher real yields are offsetting geopolitical support.”
“While elevated energy prices and Middle East tensions continue to underpin safe‑haven demand, concerns that inflation pressures could delay Federal Reserve rate cuts have capped the upside.”
Read more: Stocks rise as investors find signs of stability
“In the near term, gold remains caught between geopolitical risk and macro headwinds from higher rates,” they said. “We remain constructive over the medium term amid diversification demand, central bank buying and stagflation risks. Yet, downside risks persist if the conflict is prolonged, reinforcing a higher-for-longer rates outlook.”
Investors will also be keeping an eye on interest rate decisions from the Bank of England and the European Central Bank, both due out on Thursday.
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