Gold prices saw a slight decline on Wednesday as traders exercised caution ahead of the Federal Reserve’s interest rate decision, which is scheduled for later in the day. The recent rise in inflation has raised concerns about a potentially hawkish outcome from the central bank.
While increased uncertainty before the Fed meeting has supported gold prices in recent sessions, they have remained above the $1,900 per ounce level. However, the gains have been limited by the strength of the U.S. dollar, which is trading close to six-month highs.
Spot gold fell 0.1% to $1,930.22 per ounce, while gold futures expiring in December dropped 0.1% to $1,950.95 per ounce as of 00:28 ET (04:28 GMT).
Stronger U.S. Treasury yields also put pressure on gold prices as markets prepared for a potentially hawkish outlook from the Federal Reserve.
The Federal Reserve is widely expected to keep interest rates unchanged at the conclusion of its two-day meeting later in the day. However, the recent uptick in inflation, driven in part by higher oil prices, may lead to a more hawkish stance from the central bank. The Fed has left open the possibility of at least one more rate hike this year, which it could signal during its announcement.
Even if the Fed doesn’t signal further rate hikes, it is expected to maintain interest rates at levels not seen in over 20 years until at least mid-2024. This presents a subdued outlook for gold and other non-yielding assets, as higher interest rates increase the opportunity cost of holding gold.
In addition to the Federal Reserve, interest rate decisions in the UK and Japan are also on the agenda for this week.
Copper Prices Dip Amid Dollar Strength and China Uncertainty
Copper prices experienced a slight decline on Wednesday, marking their fourth consecutive session of losses. The dip was attributed to pressure from the strengthening U.S. dollar and uncertainty surrounding China, a major importer of the metal.
Copper futures fell 0.3% to $3.7428 per pound.
The People’s Bank of China maintained its key loan prime rates at record lows on Wednesday, in line with expectations. However, the central bank is also expected to maintain its pace of liquidity measures aimed at supporting a slowing economic recovery.
Investors are closely monitoring Chinese business activity data for September in the coming week. August data had shown some signs of improvement, but concerns about an economic slowdown in China have weighed on copper prices over the past year.
