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Gold flat as investors mark time ahead of Fed outcome

July 27, 2022By Reuters

July 27 (Reuters) – Gold prices were little changed on Wednesday, as investors stayed away from taking big positions ahead of a US Federal Reserve interest rate decision that could influence the outlook for bullion.

Spot gold was nearly flat at USD 1,716.59 per ounce at 0308 GMT. US gold futures dipped 0.2% to USD 1,713.90.

The US central bank is widely expected to raise interest rates by another 75 basis points (bps) at the conclusion of its policy meeting on Wednesday, as it attempts to tame runaway inflation without triggering a recession.

With a 75-bp hike already priced in, bullion could hold ground or trend lower after the Fed meeting, depending on how much short covering takes place, said Michael Langford, director at corporate advisory firm AirGuide.

Higher interest rates and bond yields increase the opportunity cost of holding non-yielding bullion.

Benchmark US 10-year Treasury yields firmed, while the dollar eased after a sharp rise on Tuesday, increasing the greenback-priced gold’s appeal among buyers holding other currencies.

“Interest rate rises will continue for the next three months. This will put downward pressure on gold prices and should see gold break below USD 1,700/oz. The key reason for this is the ongoing flow of funds to the dollar,” Langford said.

Meanwhile, US consumer confidence dropped to the lowest in nearly 1-1/2 years this month amid persistent worries about increasing inflation and higher interest rates, which could undercut spending, pointing to slower economic growth at the start of the third quarter.

The global economy is in the grips of a serious slowdown, with some key economies at high risk of recession and only sparse meaningful cooling in inflation over the next year, according to Reuters polls of economists.

Spot silver dipped 0.1% to USD 18.61 per ounce, platinum fell 0.3% to USD 870.77, and palladium firmed 0.5% to USD 2,019.91.

(Reporting by Bharat Govind Gautam in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)

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