Gold futures on the COMEX division of the New York Mercantile Exchange fell on Wednesday as investors traded cautiously ahead of the Federal Open Market Committee (FOMC) announcement from the U.S. central bank.
The most active gold contract for February delivery fell 4.4 U. S. dollars, or 0.39 percent, to settle at 1,115.80 dollars per ounce. The precious metal was put under pressure as investors left gold's safe haven properties ahead of the January FOMC meeting.
Despite a recent rise in the price of gold due to global economic instability, analysts say the long-term trend for gold remains bearish as the Fed began the first of its interest rate hikes in December, despite expectations for a delay until 2016.
Some analysts believe that the Fed may increase its key interest rate at the next Federal Open Market Committee (FOMC) meeting in March. An increase in the Fed's interest rate drives investors away from gold and towards assets with a return, as the precious metal bears no interest.
Until the December FOMC meeting there had not been an increase in the Fed's interest rate since June 2006, before the beginning of the American financial crisis. Gold was put under further pressure as a report released by the U.S. Department of Commerce on Wednesday showed new home sales increased by 10.8 percent to a 544,000 annualized rate, which was much-better-than-expected.
Analysts note that supply in the housing market remains low, which may signal some weakness, but overall believe that this report shows strength in the housing market. The market remains unsure of when the next rate hike, from a 0. 50 rate to a 0.75 rate will occur.
Traders are wagering that, at the earliest, the Fed may raise rates from 0.50 to 0.75 during the March Federal Open Market Commitee (FOMC) meeting. The current implied probability of a hike from 0.50 to 0.75 is at 33 percent for the March meeting, and 13 percent at the January meeting.
Silver for March delivery fell 10.5 cents, or 0.72 percent, to close at 14.459 dollars per ounce. Platinum for April delivery added 5.2 dollars, or 0.59 percent, to close at 882.10 dollars per ounce.
Latest comments