On Wednesday, the value of gold declined by 0.6% to $1,993.99 per ounce as the US dollar gained some traction. U.S. gold futures also fell by 0.8% to $2,003.30. The rising value of the dollar, which was up 0.2% according to the dollar index, made gold less affordable for buyers using other currencies.
Market analysts are closely monitoring whether the Federal Reserve will increase interest rates by 25 basis points in May before pausing, with a likelihood of 86.6% based on the CME FedWatch tool.
Yeap Jun Rong, a market analyst at IG, stated, “Expectations are already priced in for a 25 basis-point hike, leaving much of the focus on whether a rate pause will be signaled thereafter.”
While some investors believe that a rate pause could provide support for gold prices, Rong suggests that the possibility of some unwinding in prices may still be on the table. The Fed’s recent data showing persistent inflation supports St. Louis Fed President James Bullard’s stance that interest rates should continue to rise.
However, Atlanta Fed President Raphael Bostic believes that one more hike should be enough before observing how the policy is affecting the economy. Investors are anticipating more comments from Fed officials before entering a blackout period from April 22 ahead of the May meeting.
In the meantime, investors are monitoring the movement of other precious metals such as silver, which declined by 0.8% to $25.00 per ounce, platinum, which fell by 1.6% to $1,065.53, and palladium, which increased by 0.4% to $1,614.23.
Additionally, data released on Wednesday showed that Britain’s consumer price inflation fell slightly in March to 10.1% from February’s 10.4%, with markets seeing a 95% chance of the Bank of England raising interest rates next month.
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