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 GoldForecaster.com.
“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.
