Gold prices recovered on Wednesday ahead of the release of the Federal Reserve’s policy statement. The yellow metal rose despite the firm dollar that remained close to a one-month high against rival currencies.
The meeting of the Federal Open Market Committee (FOMC) will conclude today. And investors are waiting for clues on when the tapering may begin. The central bank will provide an outlook on interest rate hikes and, for the first time, offer rate projection for 2024. Analysts expect the Fed to announce the start of tapering in the fourth quarter. It would lift Treasury yields and push bullion prices down.
Spot gold is currently trading at $1,779.86 per ounce as of 0801 GMT.
Ilya Spivak, a currency strategist at DailyFX, said gold could get some relief in the near term without an official Fed taper signal. If the Fed considers cumulative rate hikes in 2024, that would be a negative catalyst for gold. Higher interest rates would raise the opportunity cost of owning non-interest-bearing assets.
His colleague, senior strategist Christopher Vecchio, noted that the recent countertrend rally in gold prices lacks teeth since the bullion has yet to clear significant technical resistance levels. The technical structure of weekly gold prices remains weak. The weekly MACD slipped below its signal line and the EMA envelope is also tilting lower. The IG Client Sentiment Index also shows that gold prices have a neutral bias in the near term. He said traders would only consider raising their investments in gold if it clears the $1,785/oz level.
In the European Union, ECB policymakers are starting to acknowledge growing inflation risks. It reached 3% and is projected to climb to 3.5% in November. That is way above the central bank’s 2% target. ECB Vice President Luis de Guindos warned that temporary price increases could become permanent. He also said production bottlenecks risks could create “second round” effects in inflation.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, fell 0.1% from 1,001.66 on Monday to 1,000.79 tons on Tuesday.
Swiss data showed that its gold shipments to India soared to the five-month high in August while exports to China fell. They remain the two largest gold consumers in the world.