Gold prices drop ahead of Fed rate hike

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Gold prices drop ahead of Fed rate hike

Investors are bracing for the Federal Reserve rates decision to put more pressure on the precious metal after the week began with a pivotal week with new declines.

The Fed hike on Wednesday will be the key factor in what happens next, and the currency has slumped over the past month in the face of the dollar's relentless gains. A bigger than expected increase could cause the greenback rally to rally and further erode the appeal of an asset that offers no interest.

Fed Chair Jerome Powell and his colleagues met on Tuesday to set interest rates with expectations for a super-sized rate increase of 75 basis points. The labor market and retail sales numbers combined with a hot inflation data last week prompted some to predict a full percentage point hike.

Australia New Zealand Banking Group analysts wrote in a note that rising geopolitical and economic risks are doing little to entice haven buying, with the US dollar still the asset of choice. The price of gold fell to a two-year low last week after plunging below the key threshold of $1,700 an ounce.

The European Central Bank is expected to lift rates in October and beyond, according to Bundesbank President Joachim Nagel.

Spot gold fell as much as 0.4% to $1,668. At the time of 11: 02 a.m. in Shanghai, the price was at 28 an ounce and at $1,671 an ounce. The Bloomberg Dollar Spot Index went up. All of the palladium, silver and platinum were retreated.

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