Gold Price Falls Ahead of Fed Decision

London (Dec 13) Gold prices traded near 10-month lows on Tuesday in London, as the precious metal remained under pressure ahead of this week’s meeting by the Federal Reserve, which is expected to raise rates.

Spot gold in London was down 0.46% at $1,158.82 a troy ounce in mid-morning trade in Europe, after trading at its lowest price since early February earlier in the morning.

“Gold is under renewed pressure this week as market participants wait for the results of the FOMC meeting this Wednesday,” said Joni Teves, a strategist at UBS.

The FOMC’s two-day meeting will begin on Tuesday, but the announcement on whether the Fed will raise rates will come on Wednesday. A rate increase would typically be bearish for the metal, which does not bear interest and so struggles to compete with other investments when rates rise.

“I think the consensus is there will be a rate increase,” said Nitesh Shah, commodities strategist at ETF Securities in London.

However, Mr. Shah said many analysts expected that a rate hike -- which has been anticipated for months -- was already priced into the market, and investors would now look ahead to clues on the timing of future rate hikes in 2017.

Gold was also under pressure from a stronger U.S. dollar and stronger equity markets on Tuesday.

The WSJ Dollar Index, which measures the dollar against a basket of other currencies, was up 0.17%. A stronger dollar makes dollar-denominated commodities like gold less affordable for investors who hold other currencies.

The Stoxx Europe 600 was also rising on Tuesday.

The other precious metals were mixed. Silver was down 0.47% at $17.01 a troy ounce, platinum was down 0.64% at $925.50 a troy ounce, and palladium was up 0.03% at $725.25 a troy ounce.

Source: WSJ