Fed Decision Could Cause Gold Price Drop
Gold prices are up at the moment, but that could change after the upcoming Federal Reserve interest rate decision.
That decision is expected on Wednesday, after two days of meetings. The expectation is that the Federal Reserve will leave interest rates alone, which could help gold to stay up.
Gold prices for Tuesday were up $1.85 bringing the cost up to $2,033.17 per ounce. If the price does drop after the rate decision, that could bring gold down as low as $2,000. That possibility concerns gold investors, since that is a psychologically significant marker, and the price may drop more rapidly after that.
The price of gold may falter even if the Federal Reserve makes no move on Wednesday but does not assure markets that there will be no upcoming interest rate cuts. As rates decrease, the opportunity costs for holding bullion decrease as well. Inflation and gold are closely tied, as gold is seen as a hedge against rising inflation.
Why Is Gold up Right Now?
Gold is being buoyed by a US dollar that is performing slightly weaker than normal and some lower than normal treasury yields. The market is hesitant to invest too much in gold until the Fed’s decision hits, so right now the market is going to see very little momentum and movement.
As the dollar falls, gold rises in response. The dollar declined 0.2% today, and the US Treasury note yields fell to 4.0360%.
The price is gold is way above where it was a year ago. The price per ounce was $1,928 in January of last year. The price fell substantially late year in October to $1,821, but it moved sharply bullish from there and has stayed well above that level since then.
Watch for movement from this commodity Wednesday after the rate decision, and from there, the direction will be partially influenced by that announcement.
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