Gold futures were headed lower Wednesday morning and may end in negative territory for the first time in three sessions, as investors watched for the latest update on policy from the Federal Reserve which could influence prices for precious metals.
The Fed is scheduled to release a policy statement and projections for interest rates at 2 p.m. Eastern Time, a half-hour after trade on Comex for gold settles. That release will be followed by a news conference hosted by Fed Chairman Jerome Powell at 2:30 p.m.
“The most dovish (and relatively unlikely) hypothesis, implies that the tapering might not be confirmed before the end of 2021,” said Carlo Alberto De Casa, market analyst for Kinesis Money, in a daily note. “This would be a U-turn from what we heard at the Jackson Hole Symposium in August and does not seem justified by the good macroeconomic data of the last few weeks.”
At the same time, the opposite, hawkish scenario, with the immediate announcement of the start of the tapering, is “not seen as particularly likely, either,” he said. “Any dovish decision would open space for new rallies [in gold], while a hawkish surprise could curb the current rebound.”
Investors will also be on the lookout for the outlook for Fed interest-rate increases and signs that the fiscal health of China’s highly levered property developer Evergrande is giving the central bank any cause for concern about knock-on effects in the U.S. and elsewhere.
December gold fell $2.50, or 0.1%, to $1,775.70 an ounce, after rising 0.8% on Tuesday. December silver, however, edged up by 17.4 cents, or 0.7% to $22.78 an ounce, extending a 1.8% rise from the previous session.
“Any aggressive move by the central bank to change the policy rate will also adversely affect the precious metal as the opportunity cost of holding gold would rise and investors will prefer having exposure to riskier assets to earn higher returns,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
Meanwhile, the Bank of Japan on Wednesday confirmed that it would stick to an ultraeasy monetary policy as it wrestles with COVID-19 outbreaks caused by the delta variant.
Among other metals traded on Comex, December copper climbed 2.8% to $4.24 a pound. October platinum rose nearly 4.3% to $991.20 an ounce and December palladium traded at $1,982.50 an ounce, up almost 4.7%.