Gold prices have been falling as the US dollar strengthens against other major currencies, making gold more expensive for international buyers. This decline in gold's appeal is further exacerbated by a cautious market sentiment and despite ongoing geopolitical uncertainties. Investors are closely watching the Federal Reserve's two-day policy meeting, which is expected to conclude with interest rates remaining unchanged. However, the focus will be on Fed Chair Jerome Powell's post-meeting remarks for clues on future rate adjustments. Higher interest rates typically reduce the attractiveness of non-yielding assets such as gold.
Gold futures for August delivery on the Multi Commodity Exchange saw a significant drop of $1,213, or 0.85%, settling at $141,850 per 10 grams. This decline in futures prices reflects global market trends and a prevailing caution among traders ahead of the Fed's monetary policy announcement. Spot gold was also down by 1.5%, trading at $3,275.92 per ounce, while US gold futures settled 0.8% lower at $3,352.8. Other precious metals like silver, platinum, and palladium also experienced declines, with silver dropping 3.2% to $36.97 per ounce, platinum losing 6.6% to $1,303.19, and palladium down 4.9% to $1,196.75.
The dollar index, which measures the US currency against a basket of peers, eased slightly by 0.15% to 101.27 but remained near a one-month high of 101.63 touched earlier. Market participants are anticipating no rate hike from the Fed, but strategist Sim Moh Siong from OCBC suggests that the messaging from the Fed will be more crucial than the decision itself. A hawkish guidance from the Fed could lead to a stronger dollar, further weighing on gold. The possibility of the Federal Open Market Committee's policy decision triggering a further strengthening of the dollar, potentially pushing USD/JPY to $164, is also being considered.
