Gold Slumps Ahead of Fed Rate Decision Amid Muted Expectations
Gold prices declined ahead of the Federal Reserve's interest rate decision on July 29. Traders are positioning themselves for the announcement, expecting a quarter-point increase in rates.
The US Federal Reserve is divided between June's lower-than-expected inflation reading and the recent rise in oil prices due to tensions between the US and Iran.
Citadel Securities expects a rate hike this week, which would strengthen Fed Chairman Kevin Warsh's credibility in fighting inflation. However, even if rates remain unchanged, a hawkish message from the Fed could support the US dollar and temporarily cap gold's recovery.
The recent developments in the Middle East have added further support to gold prices. President Donald Trump said on July 27 that the US and Iran are once again in talks to end the five-month war.
Despite this, gold is down nearly a quarter since the US-Iran conflict began five months ago. The metal has held near the key support level of $4,000 an ounce since late June, bolstered by dip-buying and a wave of buying from bullion-backed exchange-traded funds.