Gold futures on Wednesday edged up from the three-week lows notched in the previous session, shaking off a firmer dollar ahead of a widely expected interest-rate hike by the Federal Reserve and potential clues on how aggressive the central bank panel will be with rates from here.
Investors across financial markets have priced in expectations the Fed will raise its benchmark rate by a quarter-percentage point. Investors are watching for hints that new Fed Chairman Jerome Powell and team will signal four rate rises in 2018 rather than three as previously signaled.
The rate announcement comes out at 2 p.m. Eastern, followed by Powell’s press conference at 2:30 p.m.
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Ahead of the Fed decision, April gold GCJ8, +0.24% rose $3.80, or 0.3%, to $1,321.40 an ounce. It settled Tuesday at $1,311.90 per ounce. Prices ended at their lowest point since March 1, when prices settled at $1,305.20—their lowest settlement year to date, according to FactSet data. May silver SIK8, +0.22% also rebounded Wednesday, last changing hands at $16.25 an ounce, up 0.4%.
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The ICE U.S. Dollar Index DXY, +0.26% rose 0.2% to 90.145. Gold and the dollar typically move inversely, as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.
“Given that both oil and gold are denominated in U.S. dollars, they are also likely to react to the FOMC decision later today,” said Andreas Georgiou, investment analyst with trading firm XM. “A weaker dollar on the back of a ‘cautious’ Fed could see these commodities gain, whereas a stronger greenback could cause them to record some losses.”
Higher interest rates usually drive the dollar north and can reduce the appeal of nonyielding precious metals, but gold holders are also watching to make sure a rate-hiking Fed stays ahead of the curve in staving off inflation, against which gold typically acts as a hedge.
Meanwhile, May copper HGK8, -0.71% fell 0.1% to $3.035 a pound. April platinum PLJ8, +0.01% rose 0.1% to $946 an ounce, while June palladium PAM8, +0.52% rose 0.2% to $977.95 an ounce.
Among exchange-traded funds, the silver-focused exchange-traded iShares Silver Trust SLV, -0.71% tipped 0.3% higher, while the SPDR Gold Shares GLD, -0.45% rose by 0.4% and the VanEck Vectors Gold Miners ETF GDX, -1.12% fell 0.6%.