Gold prices fell Wednesday, setting the yellow metal up for its lowest finish in about a month as investors await clues from U.S. Federal Reserve officials on the pace of interest-rate increases and the economic outlook.
The central bank will conclude their two-day monetary policy meeting and issue a statement shortly after the settlement for gold futures prices later Wednesday.
June gold fell $7.30, or 0.6%, to $1,249.70 an ounce. A settlement around this level would be the lowest since April 5, according to FactSet data.
The Fed decision also comes two days ahead of U.S. employment data for April, scheduled to be released on Friday, and another likely market mover across the risk spectrum.
Rising real interest rates tend to lower the opportunity costs of holding gold because the metal provides no yield. Higher rates may also boost the value of the dollar, which usually moves in the opposite direction of the gold price.
“A sanguine tone [from the Fed]despite slowing U.S. growth in the first quarter may reinforce the likelihood of a rate hike in June, sending the metal lower,” said Ilya Spivak, currency and metals analyst with Daily FX.
“A newly cautious posture may be supportive, however.”
Meanwhile, silver for July delivery dropped 28.1 cents, or 1.7%, to $16.55 an ounce, poised for the lowest settlement since early January.
The ICE Dollar Index which gauges the greenback’s strength against a basket of six rivals, was up less than 0.1% at 99.062.
The dollar firmed somewhat after a report on private-sector employment, showed a slowdown in April as employers added 177,000 jobs, ADP reported Wednesday, down from 255,000 jobs created in March. A strong dollar weighs on asses priced in the currency.
Gold and silver prices have generally declined since mid- to late-April, as geopolitical tensions, particularly those associated with the elections in France, have started to recede. Precious metals tend to benefit from haven demand amid uncertainty.
With a runoff between centrist candidate Emmanuel Macron and right-wing candidate Marine Le Pen,
“the fears for a Frexit have now been reduced whilst in the U.S.A., a government shutdown was avoided as well,” said Nico Pantelis, head of research at Secular Investor.
“Two positive developments for the world, but this obviously reduces the demand and appeal of gold as an insurance policy against world-wide turmoils.”
“Gold stocks have been relatively weak and falling last week much faster than gold,” said Peter Spina, president and chief executive officer of GoldSeek.com.
But gold stocks climbed Wednesday, even as gold prices fell — offering the first sign that the market may be
“forecasting gold to hold $1,200-plus on this pullback,” said Spina.