Gold price declines as dollar progresses ahead of Fed policy decision

Gold prices fell Wednesday, heading to their lowest level in a month, before the Federal Reserve 's afternoon decision that is expected to generate a third rate hike. interest of the year.

The decision would be a potentially negative move for gold as it tends to drive up the dollar and US bond yields.

December gold

GCZ8, -0.52%

fell $ 6.90, or 0.6%, to $ 1,198.20 an ounce. The most active contract prices have not been as low since August 23, according to data from FactSet. The dollar index

DXY, + 0.20%

increased by 0.2% to 94.35.

"The volatility of gold remains largely a function of the US dollar," said Fawad Razaqzada, technical analyst at Forex.com, in a comment sent by email. "As a result, the next directional movement of gold may very well depend on how [Federal Open Market Committee] it's today. "

The two-day meeting of Fed policymakers concludes with a statement to be issued at 2 pm Eastern time, shortly after the gold futures settlement, followed by President Jerome Powell's press conference at 14:30. The market is estimated at over 90% the probability of a rate hike in a quarter of a point and shows a rise of four rates in 2018. Investors are eager to hear the pace of future rate hikes, including the likelihood of a rate hike in December.

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"As a rate hike is very likely and therefore taken into account, the dollar's reaction will be largely influenced by the Fed's forecasts and by noticeable changes in the plots," said Razaqzada. The dot plot is the projection of each FOMC participant's assessment of the appropriate mid-point of the target range for the federal funds rate.

"The market is eager to know if Fed officials will raise their expectations of the three interest rate increases planned for 2019," he added.

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According to economists, this approach is largely due to the fact that trade tensions between the United States and its major partners, including China, have shown no sign of resolution in the near future, "said Razaqzada.

Gold is sensitive to rising rates as it drives up US bond yields, reduces the attractiveness of unproductive bullion and tends to boost the dollar, making gold more expensive for buyers with other currencies. Gold prices based on the most active contracts have decreased by 8.5% so far in 2018, while the dollar index is up about 2, 4%, both movements being largely linked to a tightening of the Fed.

"If Powell is concerned about the economic impact of import tariffs, then it might sound a bit complicated, so we could see a bearish reaction from the US dollar and a bullish movement of gold," he said. Razaqzada.

Meanwhile, December money

SIZ8, -0.54%

was down 0.3% to $ 14.445 an ounce, while December's copper

HGZ8, + 0.18%

rose 0.2% to $ 2.829 per pound.

January Platinum

PLF9, -0.08%

who is now the most active, added a penny to $ 826.30 an ounce and the palladium of December

PLZ8, + 0.00%

up 0.3% to $ 1,056.50 an ounce, poised to stabilize at the highest for a most active contract since January.

The popular SPDR Gold Trust

GLD, -0.55%

and the iShares Silver Trust

SLV, -0.55%

each dropped by 0.5%. The ETF VanEck Vectors Gold Miners

GDX, -1.43%

lost 1.3%.

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