Gold Retreats Ahead of Fed Interest Rate Decision

Gold prices were dented as uncertainty grew ahead of the Federal Reserve’s interest rate decision and key Treasury announcement on Wednesday.

Spot gold declined 0.03% to $1,983.58 an ounce, and December contract gold futures dropped 0.09% to $1,992.45 in the November 1 Asian session.

Traders have also reduced their risk premium for the yellow metal due to diminished concerns about the possible economic impact of the Israel-Hamas conflict.

Gold gained sharply from the spat in October, but it has been facing profit-taking as the US dollar and Treasury yields rose ahead of the Fed meeting this week.

Traders now focus on the US central bank’s meeting later today, with expectations of interest rates being maintained. Still, the Fed is likely to reaffirm its commitment to extended higher rates, considering the potential for sticky inflation, a robust job market, and overall economic strength.

That scenario is unfavorable for gold as higher interest rates drive the opportunity cost of holding the yellow metal higher.

However, before the Fed’s decision, markets will await the US Treasury’s announcement on its plans to refinance its considerable debt load. The statement may offer insights into the size and mix of Treasury auctions, especially amid bond market turbulence in the prior month.

Treasury yields climbed on Wednesday, with the 10-year note increasing 0.59% to 4.91%, close to its 16-year high in October.

Upcoming Fed Decision Keeps Gold in Check

On Wednesday, gold prices dropped to $1,975, extending a decline from a five-month peak.

Gold dipped for the third day due to easing Israel-Hamas concerns and expectations of a hawkish move from the Fed. However, the yellow metal recovered slightly, with traders remaining cautious before the central bank’s meeting.

Traders will rely on US macroeconomic data, such as private-sector employment reports of automatic data processing (ADP).

They will consider the upcoming manufacturing purchasing managers’ index (PMI) data from the Institute for Supply Management (ISM) and the Job Openings and Labor Turnover Survey (JOLTS) report.

Limited selling suggests caution for bearish traders as China’s fourth-quarter economic data offer some support to safe-haven gold.