Gold price hits four-month low as Fed decides on interest rates

The price of gold has been trading near its lowest level in over four months so far in today’s session. Markets will now await the conclusion of the Federal Reserve’s monetary policy meeting later today for further cues on direction, while assets in Exchange Traded Products (ETPs) backed by bullion dropped amid a decline in sentiment.

Gold for immediate delivery had shed $1.87, or 0.16 percent, to $1,147.50 per troy ounce as of 10:19 GMT, about 6.4 percent lower than its 50-day simple moving average of $1,225.42. Bullion was trading not far from yesterday’s intraday low of $1,142.59, which was its weakest level since 07 November.
Traders will now await the release of the statement from the Federal Open Market Committee (FOMC) at 18:00 GMT, which will mark the conclusion of the central bank’s two-day monetary policy meeting. The consensus amongst analysts is that Fed officials will alter the wording of their forward guidance on interest rates, which may provide insight into the timing of the first hike in borrowing costs in nearly a decade.
According to a note from HSBC analyst James Steel cited by Reuters, however, upcoming US inflation data may not prove robust enough to prompt an interest rate hike by mid-year, with policy makers likely to delay taking any action before their meeting in September.
“The removal of the word “patient” from the FOMC’s guidance may initially pressure gold prices, especially if it helps to further boost the dollar,” Steel explained. “That said, if a rate rise does not occur in June or if inflation data does not move up to the 2 percent target level, then investor sentiment toward gold may change for the positive and prices may trade higher.”
On the COMEX in New York, gold for April delivery had dropped $1.4 to $1,146.7 an ounce as of 09:58 GMT. Gary Wagner, editor of The Gold Forecast, wrote in a note from yesterday that bearish sentiment for bullion has prompted investors to exit gold-backed ETPs. Wagner claims that investor sentiment toward gold “continues its bearish bent. ETF Securities, the gold-backed exchange-traded products, said that last week its long gold funds saw the largest weekly outflows since inception. $375 million exited the ETF.”