Price of Gold Slips as Fed Rate Decision Approaches

APMEX

9/26/2018 9:57:14 AM

Daily Gold & Silver Market Report – 09/26/2018

• Gold prices down ahead of Fed interest rate announcement.
• Gold bullion more susceptible to interest rate changes than other commodities.
• Widening Platinum-Gold spread draws attention from investors.

Price of Gold Slips as Fed Rate Decision Approaches

Gold prices began to slip in early trading Wednesday as the U.S. dollar gained strength in advance of an anticipated announcement of increased interest rates by the Federal Reserve. Investors also hope to get a glimpse of the Fed’s plan for future releases later this year. In a Reuters report published by Nasdaq, it was pointed out Gold is more susceptible to interest rate hikes than other commodities because higher rates typically give the U.S. dollar a boost, which makes Gold bullion more costly to consumers who trade in other forms of currency.

The announcement from the Federal Reserve is expected around 2 p.m. (ET) Wednesday, but analysts believe the interest rate hike is a given and that a significant shift in Gold prices is unlikely. It is expected Precious Metals markets will look toward economic and interest rate projections and Chairman Jerome Powell’s news conference for other data points to drive new support for Gold. Forex.com Analyst Fawad Razaqzada said, “If the Fed appears more dovish than expected we may see a break-out for Gold."

Since reaching a high in April, Gold prices have sunk more than 12 percent as the U.S. economy has flourished. Factors that remain a challenge for Gold are increasing interest rates and the global trade war. Safe-haven investment seekers have turned to the U.S. dollar in recent months as speculators have continually predicted Gold prices will go down.

Diminishing Platinum-Gold Spread May Be Temporary

Considered more valuable than Gold for many years, Platinum has recently been trading at a discount to Gold. In the last few weeks, this discount has been increasing, leaving many economists looking for clues as to how the gap may change in the future and if Gold could soon reclaim the long-term throne as the most costly Precious Metal. As reported by Investing.com, a new study published by U.K. Precious Metals consulting firm Metals Focus suggests the price of Gold “will likely remain on top of Platinum through the end of 2018 and could even marginally expand its premium to the white metal of around $380 an ounce by next year.” Overall this year, Gold has gone down 8 percent from a February high of $1,361.40 per ounce. Platinum has slid 11 percent this year but has seen new support within the last week. However, the width of the spread between the prices of Platinum and Gold has seldom been this notable.