News

Gold prices are falling, awaiting the actions of the US Federal Reserve

  • 25 January, 2022
  • 11:22 am EET

Gold prices fell on Tuesday, awaiting signs of a rate hike during the US Federal Reserve policy meeting, which begins today.

Concerns about an acceleration of policy tightening by the US Federal Reserve have opposed the safe haven request, which has been fueled by escalating tensions over Ukraine.

Gold prices rose about $10 at the close of Monday, as stocks and US bond yields fell.

 

Gold Prices Today

The price of gold futures contracts – for February delivery – decreased by 0.01%, to reach the level of $ 1844 an ounce.

On the other hand, the price of spot delivery of the yellow metal decreased by 0.26%, to record $1838.01 an ounce.

At the same time, the price of silver futures contracts – for March delivery – increased by 0.23%, recording $23.76 an ounce.

The spot platinum price also declined by 1.18%, recording $1020.02 an ounce, while the spot palladium price increased by 0.95%, to record $2159.95 an ounce.

 

Risk Sentiment

The main factors affecting gold prices are risk-off sentiment due to nervousness, higher Treasury yields on lowered expectations of the Federal Reserve, and hedge funds cutting net long positions, said director of consultancy AirGarde Michael Langford.

“The market does not know how a potential conflict in Ukraine will affect global markets,” Langford added. “There is a huge amount of speculation. I expect gold prices to remain volatile in the short term.”

On Monday, NATO said it was putting its forces on standby and bolstering Eastern Europe with more ships and combat aircraft, in what Russia called Western “hysteria” in response to its build-up of troops on Ukraine’s borders.

 

US Federal Reserve Meeting

Investors focus on the two-day Federal Reserve policy meeting that begins later in the day, amid expectations that the US central bank will signal plans to raise interest rates by 25 basis points in March.

Gold is generally viewed as an inflation hedge, but is highly sensitive to rising US interest rates, which increases the opportunity cost of holding non-interest bearing bullion.

“Gold may trade more based on near-term inflation dynamics as well as some doubts about the possibility of inflation returning to normal significantly as markets indicate in the longer term,” JPMorgan analysts said in a note.

Holdings of the world’s largest gold-backed ETF rose to their highest level since late August 2021 last Friday.

 

 

 

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