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Metals Stocks: Gold heads lower as the market awaits the Fed policy decision

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Gold futures edged lower Wednesday as investors await the outcome of a Federal Reserve meeting that isn’t expected to result in policy changes, but will be combed for clues to the path of interest rates and asset purchases.

Read: Fed to stay dovish this week as Powell channels his inner Gary Cooper calm

Gold “remains contained inside a large bearish channel after it found some much-needed support around the $1,700 area,” said Fawad Razaqzada, market analyst at ThinkMarkets. For gold to hold onto this area, the Fed will need to be less hawkish than some expect, he said.

“If the U.S. central bank unexpectedly announces yield curve control or operation twist, this could surely send gold sharply higher,” said Razaqzada, in a market update. “Otherwise, yields and the dollar could both extend their recent gains and put further downward pressure on the precious metal.”

In Wednesday dealings, the dollar was mostly stable, with the ICE U.S. Dollar Index
DXY,
+0.02%

little changed. The 10-year Treasury note yield
TMUBMUSD10Y,
1.657%
,
meanwhile, touched its highest levels since January 2020. A rise in government debt yields can undercut appetite for precious metals.

Against this backdrop, gold for April delivery
GC00,
-0.09%

GCJ21,
-0.09%

was down $2.30, or 0.1%, at $1,728.60 an ounce on Comex. May silver
SIK21,
+0.28%

edged up by 5.2 cents or 0.2%, at $26.06 an ounce.

“Gold remains in ‘wait-and-see’ mode ahead of the Fed’s latest economic projections,” said Carlo Alberto De Casa, chief analyst at ActivTrades, in a note.

The Fed will announce its monetary policy decision at 2 p.m. Eastern time, about a half hour after gold futures settle for the session.

The central bank isn’t expected to make any tweaks to interest rates or asset purchases, but investors are eager to see the central bank’s latest projections on the economic outlook and the forecast long-term path of interest rates in the so-called “dot plot”. Expectations for a surge in economic growth as vaccine rollouts finally quell the pandemic and another $1.9 trillion round of COVID aid boosts spending have lifted inflation expectations.

See: What would cause the Fed to take a U-turn? Hint: a lot more than some high inflation readings

Bullion continues to toy with resistance at $1,730 with low volatility, De Casa said.

“From a technical point of view, a clear climb above $1,740 would open space for further gains, while a decline below the $1,700 mark will show weakness,” he said.

Among other metals traded on Comex, May copper
HGK21,
+1.06%

tacked on 0.9% to $4.11 a pound. April platinum
PLJ21,
-1.62%

shed 1.8% to $1,197.30 an ounce and June palladium
PAM21,
-0.42%

traded at $2,483.50 an ounce, down 0.3%.

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