Gold futures inched lower Wednesday, holding to a tight trading range after posting gains over the last three sessions, ahead of a Federal Reserve decision on interest rates that could set the near-term tone for the precious metal.
The yellow metal “could become the favorite trade for the rest of the year after Fed day is likely to see investors struggle for long-term bearish dollar positions, as currency wars will see dovish central bank policies globally keep the interest rate differential fluid,” said Edward Moya, senior market analyst at Oanda, in a daily update.
The most-active December gold contract on Comex GCZ19, -0.05% was down 60 cents, or 0.04%, to trade at $1,441.20 an ounce, after gaining 0.6% in the prior session. For the month, the yellow metal has gained more than 1%, headed for a third consecutive monthly rise, based on the most-active contract, according to FactSet data.
The rate-setting Federal Open Market Committee will release a decision at 2 p.m. Eastern time — a half-hour after gold futures settle on Comex — and Fed Chairman Jerome Powell will hold a news conference at 2.30 p.m.
Investors are pricing in a roughly 79% chance of a quarter-of-a-percentage point reduction in the federal funds rate to a range of 2%-2.25% from 2.25%-2.50%, with the chances of a half-a-point cut holding at around 21% based on federal-funds futures, according to CME Group data.
Data Wednesday from payroll processor ADP showing that the nation’s businesses created 156,000 private-sector jobs in July failed sway those expectations. Economists polled by Econoday had forecast a gain of 155,000.
Gold has benefited from hope that the FOMC will reduce benchmark borrowing costs and signal a willingness to do what it takes to sustain U.S. economic expansion in a record-setting 11th year of expansion.
Stephen Innes, managing partner at VM Markets Pte., in a Wednesday research note said there is one consistent theme that remains: “…Real interest rates are heading lower for the foreseeable future, making gold much cheaper to own.”
Meanwhile, September silver SIU19, -0.71% lost 14.8 cents, or 0.9%, at $16.41 an ounce. For the month, silver has gained 7%, which would market its sharpest monthly climb since December.
Among other metals Wednesday, September copper HGU19, -0.21% traded at $2.672 a pound, down nearly a penny, or 0.2%. October platinum PLV19, +0.58% added $4.30, or 0.5%, to $877 an ounce, while September palladium PAU19, +1.60% added $23.10, or 1.5%, to $1,523.20 an ounce.
The gold-backed SPDR Gold Shares exchange-traded fund GLD, -0.19% was down 0.2%.
