Gold price climbs ahead of Fed clues on rate-hike path
New York (Mar 21) Gold futures on Wednesday climbed toward their highest levels in a week, ahead of a widely expected interest-rate hike by the Federal Reserve and potential clues on how aggressive the central bank panel will be with rates from here.
Investors across financial markets have priced in expectations the Fed will raise its benchmark rate by a quarter-percentage point. Investors are watching for hints that new Fed Chairman Jerome Powell and team will signal four rate rises in 2018 rather than three as previously signaled.
The rate announcement comes out at 2 p.m. Eastern, about a half hour after gold futures settle, followed by Powell’s press conference at 2:30 p.m.
Check out: 5 things to watch from the Fed decision
April gold GCJ8, +0.86% was up $8.90, or 0.7%, to $1,320.80 an ounce. A settlement around this level would be the highest since March 14, rebounding from a Tuesday finish at the lowest in nearly three weeks. May silver SIK8, +1.64% also rebounded Wednesday, last changing hands at $16.40 an ounce, up 1.4%.
The ICE U.S. Dollar Index DXY, +0.14% fell 0.4% to 90.06. Gold and the dollar typically move inversely, as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.
“Given that both oil and gold are denominated in U.S. dollars, they are also likely to react to the FOMC decision later today,” said Andreas Georgiou, investment analyst with trading firm XM. “A weaker dollar on the back of a ‘cautious’ Fed could see these commodities gain, whereas a stronger greenback could cause them to record some losses.”
Higher interest rates usually drive the dollar north and can reduce the appeal of nonyielding precious metals, but gold holders are also watching to make sure a rate-hiking Fed stays ahead of the curve in staving off inflation, against which gold typically acts as a hedge.
“Our base case is that the Fed will not be as aggressive on its rate outlook as the market expects, as the macro data coming out of the U.S. has been decent,” said Edward Meir, an independent commodity consultant at INTL FCStone, in a recent note.
On Wednesday, data showed that February U.S. existing home sales snapped a two-month losing streak, jumping 3% from January.
Meanwhile, May copper HGK8, +0.44% rose less than 0.1% to $3.04 a pound. April platinum PLJ8, +0.60% rose 0.2% to $947.30 an ounce, while June palladium PAM8, +0.77% added 0.6% to $982 an ounce.
Among exchange-traded funds, the silver-focused exchange-traded iShares Silver Trust SLV, +1.87% moved 1.4% higher, while the SPDR Gold Shares GLD, +1.19% rose by 0.9% and the VanEck Vectors Gold Miners ETF GDX, +2.19% tacked on 1%.
MarketWatch
