By Barani Krishnan
Investing.com - Gold’s rally continued for a ninth straight day on Wednesday but traders seemed restrained in pushing prices of the yellow metal up too much ahead of the Federal Reserve’s monthly decision on interest rates and monetary policy.
While the Fed was expected to keep rates at near-zero and continue providing unlimited fiscal support to the U.S. economy and markets through the coronavirus, the dollar could also flip from its recent weakness depending on what the central bank said, and that could have adverse effects for gold.
The Fed Open Market Committee will deliver at 2:00 PM EST its monthly decision on rates and Chairman Jay Powell will take questions from the press at 2:30 PM.
“The Fed has done everything right over the past six months and the expectations are high that Powell will signal the recovery looks shakier and that their commitment to supporting the economy is stronger than ever,” said Ed Moya, analyst at New York-based online trading platform OANDA.
But gold, which has gained about 25% over the past five months, breaking record highs in the $1,900-per ounce zone to try and reach $2,000, could lose its upward momentum if traders do not find continued reasons to buy the yellow metal as a hedge against the economy.
“If gold does not break the $2000 level after the dust settles from the Fed policy meeting, bullion traders may tentatively want to run for the sidelines,” Moya said.
“Gold's bullish trend is firmly intact but a Fed-induced pullback could trigger profit-taking towards the $1,940 region.”
In Wednesday’s trade, gold futures on New York’s Comex was up $8, or 0.4%, at $1,952.60. Earlier in the day, during Asian trading, it surged to an all-time high of $1,959.75 — which was still short of Tuesday’s record high of $1,974.70.
Spot gold, a real-time indicator of trades in gold bullion, was up $1.54, or 0.1%, at $1,960.07 by 1:11 PM ET (17:11 GMT). The session peak of $1,964.26 versus Tuesday’s record high of $1,981.22.
With settlement day for Comex’s August gold due on Friday, players were also cautious with their leverage on the contract. Data on Tuesday showed the December contract — the forthcoming front-month on Comex — attracting a steady build in volume and open interest.
Silver, which had rallied along with gold for most of the past week, slid on Wednesday, in a further sign of the caution developing over the precious metals.
Silver’s front-month contract on Comex, September, was virtually flat at $24.293 per ounce after reaching eight-year highs of $26.275 on Tuesday.