Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as traders waited for the results of the U.S. Federal Reserve Open Market Committee meeting to be announced after the market's close.
The most active gold contract for April delivery fell 1.2 U.S. dollars, or 0.1 percent, to settle at 1,229.8 dollars per ounce. Gold was mostly unchanged as traders waited for Fed Chairwoman Janet Yellen to give hints on the timing of an increase in the key interest rate. Analysts believe the goal of the Fed is to soak up some of the banks' 2.5 trillion U.S. dollars of excess reserves as the U.S. economy begins to recover.
Banks become more willing to take risks in a bullish economy, and as a result could potentially release some of their excessive reserves, flooding the economy with cash, causing inflation. There is currently no expectation for a rate increase at the meeting Wednesday. Traders are wagering that, at the earliest, the Fed may raise rates from 0.50 to 0.75 during the April Federal Open Market Committee (FOMC) meeting.
According to the CMEGroup's Fedwatch tool, the current implied probability of a hike from 0.50 to 0.75 is at 27 percent at the April 2016 meeting, and 50 percent at the June 2016 meeting. The U.S. dollar also put pressure on the precious metal as the U.S. Dollar Index rose by 0.29 percent to 96.94 as of 17:30 GMT.
The index is a measure of the dollar against a basket of major currencies. Gold and the dollar typically move in opposite directions, which means if the dollar goes up, gold futures will fall as gold, measured by the dollar, becomes more expensive for investors.
The U.S. Department of Labor released a report Wednesday that showed the Consumer Price Index falling by 0.2 percent overall during February, and rose by 0.3 percent in the ex-food/energy reading.
These figures were higher than expected and put some pressure on the price of gold, which will likely be factored into the Fed's decision-making during the Federal Open Market (FOMC) Committee meeting.
Silver for May delivery fell 4.2 cents, or 0.28 percent, to close at 15.219 dollars per ounce. Platinum for April delivery dropped 1.1 dollars, or 0.11 percent, to close at 958.70 dollars per ounce.
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