Gold steadies ahead of Fed rate decision, headed for a fourth consecutive drop early Wednesday as investors awaited a widely anticipated interest rate hike from the Federal Reserve.
The decision, which most market watchers believe will be a quarter-percentage point, is designed as a counter to surging inflation. Higher interest rates are typically bearish for gold because other assets become more attractive to investors. And the yellow metal is a traditional hedge against inflation, so a reduction in inflation would also be bearish for gold.
Front-month gold futures fell 1.6% Tuesday to $1,929.70 an ounce on Comex and is down 2.8% in the first two days of this week. Gold advanced 5.8% last month after dropping 1.8% in January, its worst month since September. It retreated 3.5% in 2021. Currently, the April contract is down $10.50 (-0.54%) an ounce to $1,919.20 and the DG spot price is $1,913.70.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% Tuesday to 1,061.8 metric tons, Reuters reported.
While gold traded near a two-week low, prices remained elevated on haven demand amid the ongoing conflict between Russia and Ukraine. U.S. President Joe Biden is set to travel to Europe to discuss the crisis with NATO allies next week. The United Nations has said the Ukrainian refugee count has surged above 3 million. Ukrainian President Volodymyr Zelenskyy is also set to virtually address a joint session of the U.S. Congress on Wednesday.
Russia’s central bank said Tuesday that it would stop buying gold from banks so that they can meet increased demand from households. The country has come under crippling Western sanctions in response to its invasion of Ukraine.
In addition to the Fed announcement and Chairman Jerome Powell’s press conference Wednesday, investors were economic reports Wednesday on U.S. retail sales and home building.
Front-month silver futures retreated 0.6% Tuesday to $25.16 an ounce on Comex and is down 3.8% so far this week. Silver surged 8.8% in February after dropping 4.1% in January. It fell 12% in 2021. Silver prices are tied to industrial demand. The May contract is off currently, down $0.163 (-0.65%) an ounce to $24.995 and the DG spot price is $24.80.
Spot palladium edged up 0.8% Tuesday to $2,459.00 an ounce, though it’s down 12% in the first two days of the week and has retreated from last week’s record rally to $3,440.76. Russia produces about 40% of the world’s palladium, and the metal’s main use is in catalytic converters for gasoline-powered vehicles. There are already vehicle shortages and price increases for automobiles, and Russia’s Nornickel is the world’s largest supplier of palladium. The metal gained 5.3% last month after rallying 24% in January. It retreated 22% in 2021. The metal continues its volatility with the current DG spot price up $45.50 an ounce to $2,482.50.
Spot platinum decreased 4.7% Tuesday to $999.60 an ounce and is down 7.5% in the first two days of the week. The metal advanced 1.7% in February after rising 5.7% in January. It lost 9.4% last year. The DG spot price is currently up $12.30 an ounce to $1,017.80.
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