Gold dims ahead of Fed rate hike decision

May 01, 2023 (MLN): International gold prices experienced a slight downturn on Monday with market participants remaining cautious awaiting the Federal Reserve’s interest rate hike decision later this week.

At the time of writing, the spot gold is being traded at $1977.90, down 0.6%. U.S. gold futures trading at $1987.2, down 0.62%.

The US dollar index (DXY) rose by 0.24%, this also put downward pressure on gold prices as this makes gold more expensive for buyers outside the US.

Spot gold closed the month of April at $1989.62 marking an increase of 1.07%, this comes after a significant jump of 7.76% in the previous month.

Market participants are closely watching the upcoming Fed meeting this week, on May 2-3, with traders betting on a 25 bps rate hike. A hawkish fed tone during the meeting will likely signal the next move for equity markets, and could potentially reduce the excessive rise in gold prices.

According to Ilya Spivak, head of global macro at Tastylive, if the Federal Reserve’s decision is unexpectedly hawkish, it could have a negative impact on gold prices.

However, Spivak believes that prices are unlikely to drop below $1,930. This is because gold is generally considered to be a hedge against inflation, but rising interest rates tend to lower the appeal of the zero-yielding asset, as reported by Reuters.

In another news, on Monday, JPMorgan Chase & Co. announced that it had acquired a significant majority of assets and taken on certain liabilities of First Republic Bank.

This move came after a 97% drop in the value of the bank shares this year, and it is currently at a 36% decline in the pre-market trading today of First Republic Bank shares.

In line with the movement of gold prices, spot silver also experienced a slight dip with prices down 0.13% and trading at $25.00 per ounce.

Notably, silver closed the month of April at $25.03 marking a rise of 3.9%, this comes after silver prices surged by a huge 15.37% in the previous month, as a high beta asset class for gold.

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