Gold prices hold steady after hitting 2-week high on Fed rate pause hopes

September 19, 2023 (MLN): International gold prices remained relatively stable on Tuesday after hitting a 2-week high, as market participants priced in a potential pause in interest rate hikes by the U.S. Federal Reserve at its upcoming policy meeting.

International spot gold is currently trading at $1,930.75, reflecting a decrease of 0.15% compared to the previous close.

The CME FedWatch Tool is pricing in a 99% chance of an interest rate pause at the upcoming FED meeting.

Asian shares extended their decline, making gold more attractive for investors ahead of policy decisions by the Fed on Wednesday, the Bank of England on Thursday, and the Bank of Japan due on Friday.

U.S. FED is overwhelmingly expected to keep rates unchanged when it announces its policy decision on Wednesday, the center of attention would be on their outlook for futures rates, as Reuters reported.

“Fed Chair Powell’s speech is likely to highlight that inflation risks have not gone away but they are in a wait-and-see mode for inflation,” said Michael Langford, chief investment officer at Scorpion Minerals.

The low inventories of gasoline and diesel globally form a material risk in the short term to inflation targets, Langford said, adding that if inflation moves materially higher again, it would become more difficult to contain it.

Non-interest-bearing gold could see its appeal dim if the Fed further raises rates to control inflation.

Fed officials, who have tentatively embraced the possibility they can squelch inflation without a recession, meet this week with an autoworkers strike, a possible federal government shutdown, and a student loan squeeze on consumers posing new risks to that best-case outcome.

Meanwhile, international spot silver is currently trading at $23.17, down by 0.33% on the day.

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