Gold prices end higher, bobbing between gains and losses after Fed decision

Gold prices settled higher on Wednesday to recoup some of the losses they suffered a day earlier, then seesawed between losses and gains after the Federal Reserve’s policy-setting committee announced the largest interest-rate increase in nearly 30 years.

Price action
  • August gold
    GCQ22,
    +0.82%

    GC00,
    +0.82%
    rose $6.10, or 0.3%, to settle at $1,819.60 an ounce on Comex, recouping part of Tuesday’s 1% decline. It traded at $1,822.10 in electronic trading shorty after the Fed announcement.

  • July silver
    SIN22,
    +1.33%

    SI00,
    +1.33%
    tacked on 47 cents, or 2.2%, to $21.42 per ounce.

  • July platinum
    PLN22,
    +1.19%
    climbed by $13.90, or 1.5%, to $924.60 per ounce.

  • September palladium
    PAU22,
    +0.91%
    gained $54.10, or 3%, to $1,834.30 an ounce.

  • July copper
    HGN22,
    +0.43%
    settled at $4.1635 a pound, up a penny, or 0.2%

What analysts are saying

About a half hour after gold futures prices settled on Wednesday, the Fed said it would hike the federal-funds target rate by three-quarters of a percentage point to between 1.5% and 1.75%. In its “dot-plot forecast,” the Fed said it planned to raise its benchmark interest rate to a mid-range of 3.4% by the end of this year and to 3.8% by the end of 2023.

Gold prices had settled higher ahead of the decision, rebounding a bit from Tuesday’s 1% decline, then bobbed between losses and gains shortly after the Fed announcement.

“The driving force moving gold prices is inflation expectations, Jeff Klearman, Portfolio Manager at GraniteShares, told MarketWatch in an email after the rate decision. “While the Fed will act to increase rates…the uncertainty surrounding inflation expectations take precedence, despite a 75 [basis point] increase in the Fed funds target rates.”

And “as rates are raised, expectations of recession and falling stock prices
increase, both of which are supportive of gold prices,” he said.

Strategists at Commerzbank said Wednesday that gold has been recovering on the back of a weaker U.S. dollar during Wednesday’s New York session.

The ICE U.S. Dollar Index,
DXY,
-0.30%
a measure of the dollar’s performance against a basket of its rivals, was little changed following the Fed announcement, after trading between a high of 105.788 and a low of 104.713 Wednesday. U.S. Treasury yields
TMUBMUSD10Y,
3.308%
moved lower, with the 10-year down5 basis points to 3.4301%. Benchmark U.S. stock indexes traded higher.

With the latest Fed decision out of the way, the focus for gold trader and investors will mostly remain the same — “closely watching inflation and economic data to see if the actions taken by the Fed are providing sought-after results, or if
adjustments still need to be made,” said Klearman.

Peter Spina, president and chief executive officer at GoldSeek.com, said gold has “very limited downside” from here, and continues to “build a strong floor around these prices to keep pushing higher towards $2,000.”

G old has “very limited downside” from here, and continues to “build a strong floor around these prices to keep pushing higher towards $2,000.”


— Peter Spina, GoldSeek.com

He still believes gold is “set-up for a move to $2,000 and beyond” in the third or fourth this year.

“Global central banks will not be able to get hold of inflation without crashing their economies,” he told MarketWatch. “The risks and fears are growing. Gold is in a perfect place here to benefit from the many problems we are facing.”



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