Yahoo Finance Gold prices edge higher as investors await Fed policy decision
The price of gold could consolidate if the Fed goes ahead and pauses its 15-month rate hiking campaign
Gold prices edged higher on Tuesday as traders considered the outcome of the Federal Reserve’s policy decision on interest rates due on Wednesday to help determine where the price of the precious metal may go next.
At the time of writing, gold (GC=F) was trading up 0.35% at $1,976 an ounce with the markets widely expecting the Fed to pause its 15-month rate hiking campaign, and to potentially raise rates next month by another 25bp instead, in a bid to tame inflation.
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“The probability of the Fed pausing in the upcoming meeting has risen, but strong economic activity is suggesting the Fed will remain hawkish in the short term. This could see the gold price consolidating,” ANZ Research said in a note to clients.
However, ANZ further noted that when the Fed does stop raising rates, it could act as a tailwind for gold, as would a falling US dollar.
Meanwhile, gold was also supported on Tuesday by the easing of the US dollar as the bullion became a more attractive hedge against inflation for investors. However, its appeal could subside if rates rise.
It also comes as a recent survey by the World Gold Council (WGC), conducted in May, revealed that about a quarter of central banks plan to increase their gold holdings over the next 12 months as the future role of the US dollar comes into question.
Read more: FTSE shrugs off UK wage growth jumping to record high
Gold price outlook
Doug Turner at Kinesis Money shared his thoughts with Yahoo Finance on the price outlook for gold given the current market-swaying factors at play.
“Ahead of an impactful week of central bank interest decision-making, gold is expected to continue trading steadily above $1,950 (£1550.62) an ounce, in a recently-formed narrow range.
“Investors are awaiting many key data points, including an expected pause in interest hikes. This pause could provide short-term relief for gold, while a surprise rate hike could see the price fall lower given its response to previous hikes and the renewed strength of the US dollar and global monetary conditions,” he said.
Turner also noted that the longer-term outlook for gold is promising, with signs of global economic growth wavering, market confidence remaining fragile and the aftershocks of March’s US banking crisis still being felt.
“Gold’s safe-haven demand may yet continue into the second half of 2023 and beyond,” he added.
Watch: Global central banks expected to continue in their rate hikes
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