Gold futures rose modestly on Wednesday, aiming to snap a three-session slump, ahead of a policy update from the Federal Reserve due later in the session, which could set the tone for financial markets over the next few months.
The Fed will release an updated policy statement and its projections for interest rates, known as the dot plot, at 2 p.m. Eastern, a half-hour after gold futures settle on Comex. A news conference will be held by Fed Chairman Jerome Powell at 2:30 p.m.
“A dovish and ‘still on hold’ Fed decision should see the rally in gold resume, as that will ultimately mean elevated inflation and low [interest] rates,” analysts at Sevens Report Research wrote in Wednesday’s newsletter.
A hawkish shift in tone and taper mentions, meanwhile , “will cause a spike in yields and pressure the yellow metal, likely back below $1,800” an ounce, they said.
In Wednesday dealings, gold for August delivery
was up $2.90 or 0.2% at $1,859.30 an ounce, following price declines in each of the last three sessions.
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Gold futures so far this week are down over 1%, as commodity investors await the Fed’s outlook for inflation, which has shown evidence of surging in the U.S. in the recovery phase from the COVID pandemic.
Many participants expect that spiking inflation may prompt the Fed to at least begin early stage discussions about rolling back some features of its pandemic-era accommodations, including tapering its asset-purchases of $80 billion in Treasurys and $40 billion in mortgage-backed securities monthly.
“Heading into this Fed meeting a ton of dovishness has already been priced in so many gold traders have been quick to lock in profits,” wrote Edward Moya, senior market analyst at Oanda, in a recent note.
“Gold volatility will remain elevated throughout the initial reaction and days post-Fed. The Fed will likely remain in wait-and-see mode with both inflation and the labor market recovery for the next few months and that should be supportive for inflows into gold,” he speculated.
Moves for metal prices come as China’s National Food and Strategic Reserves Administration, said Wednesday that it planned to release copper, aluminum, zinc and other national reserves in batches in the near future to ensure the supply and price stability of bulk commodities.
was up 1.3% at $4.39 a pound on Wednesday, after putting in a 4.3% decline to end Tuesday trade.
In economic news Wednesday, U.S. housing permits dropped 3% in May to 1.68 million yearly pace, while starts climbed 3.6% to 1.57 million annual rate. April U.S. housing starts were lowered to 1.52 million from 1.76 million. U.S. import prices rose 1.1% in May—and were up 0.9% minus fuel—contributing to an 11.3% in the past 12 months.