The gold price rose during Asian trading hours on Wednesday ahead of the US Federal Open Market Committee’s (FOMC) rate decision later in the day.
Spot gold was last at $1,064.80-1,065 per ounce, up $3.70 from Tuesday’s close. Trading ranged at $1,061.40-1,065.20 so far.
“All eyes on the FOMC tonight. Anything other than the expected 25-basis-points rate hike will see extreme volatility prevail across all markets,” said MKS Group on Wednesday morning.
After keeping the Federal Fund rate at a record low of 0.25 percent for almost a decade, the US Federal Open Market Committee (FOMC) is expected to announce a rate hike later on Wednesday when its two-day meeting concludes.
Some market watchers see the gold price falling below $1,000 after the rate hike.
“Most investors agree that the bullion price reflects the first hike that will happen this week. However, we note that gold was trading as low as $1,046 less than two weeks ago. Depending on the Fed’s message, we do not exclude the possibility of gold falling below $1,000 as investors reposition their portfolios,” said Dmitriy Kolomytsyn, analyst with Sberbank Investment Research.
The Federal Reserve’s post-meeting statements will be in focus, this including economic forecasts, the policy committee members’ targets for the appropriate policy rate settings in the future, and the tone of the FOMC and Fed chair Janet Yellen’s post-meeting communication.
In US data released Tuesday, CPI and Core CPI month-over-month in November were in-line with expectations at null and 0.2 percent respectively.
The Empire State Manufacturing Index in December was -4.6, above the forecast of -5.7, while the NAHB Housing Market Index for December was 61, just below economic consensus of 63.
Signs of healthy inflation boosted the dollar. The US dollar index was last at 98.08, down 0.05 percent from the previous day’s close, but has stayed above 98 so far today after trading below the level for the most of the past week.
In other data, the Eurozone, French and German flash manufacturing and services PMIs, along with the Eurozone’s final CPI, final core CPI and trade balance are due later on Wednesday.
Data from the US including building permits, housing starts, capacity utilisation rate, industrial production, flash manufacturing PMI and crude oil inventories are also expected later today.
In other precious metals, silver was up $0.08 to $13.82/13.87 recently.
“As we warned recently, although we believed that silver was in a bottoming-out process, we could not discount the possibility of new year-to-date lows. That said, we believe that the sell-off in silver prices is nearly complete and that a rally may be around the corner,” said Boris Mikanikrezai, metals analyst at Fastmarkets.
Platinum increased $9 to $859/864, while palladium rose $3 to $562/$567 so far on Wednesday.
On the Shanghai Futures Exchange, gold for June delivery was unchanged at 225 yuan per gram, while June silver was flat at 3,251 yuan per kilogram.
