Gold Falls Amid Expectations of US Rate Hike and Middle East Developments
Gold prices declined ahead of the US Federal Reserve's interest rate decision on July 29, as traders weigh the prospects of a potential hike. The metal fell by as much as 0.8 per cent to near $4,040 an ounce, erasing a modest gain from the previous session.
The uncertainty surrounding the Fed's decision has led to positioning for a quarter-point increase, with interest-rate swaps implying a 40 per cent chance of such a move. This is an unusually high degree of uncertainty so close to a Fed decision by recent standards.
Citadel Securities expects a hike this week, which it believes would strengthen Fed Chairman Kevin Warsh's credibility in the battle against inflation. Even if rates remain unchanged, a hawkish message or signal that further tightening remains under consideration could lend support to real yields and the US dollar, temporarily capping gold's recovery.
The recent developments in the Middle East have added further support to gold, with President Donald Trump stating that the US and Iran are once more in talks to end the five-month war. The expectation of higher rates is keeping gold under pressure, however, according to analysts from Shenzhen-based Zhishui Investment Management.
Spot gold slipped 0.7 per cent to $4,047.22 an ounce at 10:25am in Singapore, while silver fell 1.7 per cent to $57.39 an ounce.