Gold Lower With Fed Disappointing Only Upside

Gold prices came under pressure on Monday, as oil plunged anew and investors braced for Wednesday’s U.S. interest-rate decision by Federal Reserve policy makers.

Gold for February delivery  fell $7.20, or 0.7%, to $1,068.50 an ounce, after losing 0.8% last week. A settlement around this level would be the lowest in more than a week.

“Dealers and speculators are trying to second guess what the market’s reaction to the expected Fed rate hike on Wednesday will be and are reading the price, in line with the technical picture, as downwards,” said Julian Phillips, founder of and contributor to

“But such plays are high risk ones, for if the Fed does not affect the dollar exchange rate they will have to unwind their positions in the face of a market going the other way,” he said.

The Federal Open Market Committee is expected to raise interest rates when it meets on Tuesday and Wednesday, and a hike could weaken the appeal of the precious metal. A rate hike is widely viewed as lowering opportunity costs of owning metals that don’t offer a yield.

The probability of a Fed interest-rate hike next week is 79%, based on futures prices, according to CME Group’s FedWatch.

via Marketwatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza