Gold prices rebounded on Wednesday after settling at their lowest level in more than a month as investors awaited an interest-rate decision from the Federal Reserve’s policy-setting committee.
Price action
- The price of gold futures expiring in August GCQ22, +1.06% was up $20.8 dollars, or 1.15%, to $1,833.
- Silver futures expiring in July SIN22, +2.89% were up 51 cents, or 2.5%, to $21.5 per ounce.
- Platinum futures expiring in July PLN22, +3.07% were up $25.60, or 2.8%, to $936 per ounce.
- Palladium futures expiring in September PAU22, +3.11% gained $43.30, or 2.3%, to $1,823.50.
- Copper futures expiring in July HGN22, +0.32% were essentially flat at $4.16.
What analysts are saying
Strategists at Commerzbank said Wednesday that gold has been recovering on the back of a weaker U.S. dollar during the New York morning.
But as investors wait to hear from the Federal Reserve, Commerzbank says the prospect of bigger interest rate increases from the Fed could send gold lower, as bond yields and the U.S. dollar would be expected to rise in that scenario.
“It will be interesting to hear how Powell assesses the outlook for interest rates. If he sounds very hawkish and raises the prospect of bigger rate increases – contrary to his previous remarks – we believe that the gains that gold might potentially make would be limited, or that the gold price could continue its downswing,” said a team of Commerzbank strategists in a note to clients.
Naeem Aslam, the chief market strategist at Avatrade, said profit-taking by currency traders has driven the dollar modestly lower, which in turn is giving gold a boost.
But more importantly, fears that the Federal Reserve has failed to bring inflation under control is making the precious metal more attractive.
“The damage to the Fed’s reputation represent a riskier situation and gold traders are buying the yellow metal to hedge that risk,” Aslam said.
The ICE U.S. Dollar Index, DXY, -0.16% a measure of the dollar’s performance against a basket of its rivals, was off 0.3% to 105.2. U.S. Treasury yields TMUBMUSD10Y, 3.376% moved sharply lower, with the 10-year down 11 basis points to 3.368%. Bond yields move inversely to prices. S&P 500 futures ES00, +0.94% expiring in September were up 0.9% to 3,773.