Gold slipped around 1% on Tuesday as traders turned cautious a day before the Federal Reserve’s interest rate decision. Spot gold and gold futures both settled at $4,028.64 an ounce after falling 1.2%. The CME FedWatch tool puts the probability of the Fed holding rates steady at about 69%.
Gold prices slipped around 1% on Tuesday as precious metal market participants showed caution a day ahead of a crucial Federal Reserve interest rate decision. An extended slide in oil prices eased inflationary concerns, but that was not enough to lift the yellow metal.
Spot gold shed 1.2% to settle at $4,028.64/oz. Gold futures fell 1.2% as well, settling at the same price.
Fed expected to hold as the policy outlook stays in flux
The central bank’s two-day monetary policy committee meeting kicked off on Tuesday. The Federal Open Market Committee is mostly expected to hold interest rates steady, with the CME FedWatch tool showing a probability of about 69% for that outcome. However, the outlook for monetary policy has largely been in flux this month amid the dynamic situation in the Middle East.
Goldman Sachs called the decision an unusually uncertain one amid the volatility in oil prices. Its analysts said soft June inflation data had likely lessened support for immediate policy tightening, adding that the central bank had historically avoided delivering surprise rate hikes.
Warsh’s stance is the open question
Investors will also be keen to hear from new Fed Chair Kevin Warsh, after largely hawkish commentary from him since the last rate decision in June. Warsh has stressed that the Federal Open Market Committee is committed to delivering price stability, and he has appointed five task forces to tackle items such as communications and inflation frameworks.
JPMorgan analysts led by Alex Gallin see no immediate trigger for action. According to JPMorgan: “We believe the next move from the Fed is up”, but the analysts do not see a strong case for action this week. They called Warsh a wild card who has talked tough on getting inflation down without signalling where he stands on the policy path ahead.
Oil’s second-day slide takes pressure off prices
Turning to the Middle East, global oil prices slumped for a second straight day on Tuesday after soaring around 20% over two weeks, as the U.S. and Iran maintained a pause in hostilities from over the weekend.
President Donald Trump said on Tuesday that Washington has had some very good talks with Iran. He told reporters on Monday that there was a chance of reaching an agreement to end months of conflict, though he warned U.S. military strikes would resume if diplomacy failed.
Source: Investing.com
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