Gold Little Changed ahead of Fed

Gold Little Changed ahead of Fed

Gold little changed early Wednesday ahead of Fed as investors awaited direction from the central bank’s latest monetary policy decision, due out in the afternoon.

Most investors expect the central bank to raise interest rates by another 25 basis points, in line with February’s move. That would take the federal funds rate to 4.75% to 5.00%. The rate was near zero as recently as the first quarter of 2022. Higher interest rates are bearish for gold because they make the yellow metal less attractive as an alternate investment.

June gold dropped 2.1% Tuesday to settle at $1,958.30 an ounce on Comex, though the front-month contract is down just 1.6% so far this week. Bullion decreased 5.6% last month, its worst performance since June 2021. It increased 6.5% in January and gained 3.8% in December. The metal fell $2.40 in 2022. The June contract is currently up $3.3 (+0.17%) an ounce to $1961.60 and the DG spot price is $1942.50.

About 84.9% of investors tracked by the CME FedWatch Tool are betting that the Fed will boost rates by 25 basis points Wednesday. The remaining 15.1% of investors anticipate rates will remain unchanged. A week ago, 54.6% of investors were predicting a 25 basis-point hike, with 45.4% forecasting rates would remain unchanged. 

It would be the second 25 basis-point rate hike this year and the latest move in the Fed’s efforts to combat soaring inflation. The Fed raised rates by 25 basis points Feb. 1 following rate hikes of 50 basis points in December and 75 basis points each in June, July, September and November. 

Gold has lost some of the support it got from haven demand following the collapse of Silicon Valley Bank and the subsequent global banking crisis, which started almost two weeks ago. Investors got some reassurance from the Fed and other global central banks, which jointly announced that they were taking steps to keep the U.S. currency flowing through the world’s banking system. 

U.S. Treasury Secretary Janet Yellen told bankers Tuesday that further steps might be necessary to protect smaller banks, but the U.S. banking system is stabilizing. 

Silver May futures dropped 1% Tuesday to settle at $22.43 an ounce on Comex, and the metal is down 0.2% so far this week. Silver retreated 12% last month after falling 0.8% in January and rising 10% in December. It advanced 3% in 2022. The May contract is currently up $0.050 (+0.22%) an ounce to $22.475 and the DG spot price is $22.45.

Spot palladium slid 1.9% Tuesday to $1,417.00 an ounce. It’s down 0.9% this week. Palladium plummeted 14% in February after dropping 7.4% in January and retreating 4% in December. It lost 5.7% in 2022. The current DG spot price is up $35.40 an ounce to $1448.50.

Spot platinum fell 1.9% Tuesday to $976.80 and is down 0.5% this week.  Platinum retreated 5.9% in February after falling 4.3% in January and gaining 3.4% in December. It surged 10% in 2022. Currently, the DG spot price is up $17.20 an ounce to $994.90.

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