Investors waited to see the outcome of US Federal Reserve’s 2-day meeting that took place later in the afternoon.
The market was still worried about long-term interest rate outlooks in the US.
As long as the US inflation rate remains sticky and the US labour market is resilient, the Fed will likely slow down its rate-cutting cycles.
The February gold contract at COMEX closed the day flat, at $2,661.94 an ounce.
Gold prices are under pressure before Fed meeting
On Tuesday, gold prices on COMEX dropped below $2,650 an ounce, wiping out most of the gains made last week.
Carsten Fritsch is a commodity analyst with Commerzbank AG. He said that the main factor is the sharp increase in US bond rates, which increases the opportunity costs of gold.
Fritsch added:
This is due to a decrease in expectations for Fed rate cuts this year.
Gold is a non-yielding investment, unlike bonds.
Commerzbank believes the market has also priced in an interest rate cut at the Fed meeting that concludes today.
Investors are now focusing on comments made by Fed Chair Jerome Powell and looking for clues as to the preferred path of the central bank next year.
Fritsch stated that the price of gold could increase if the expectation of rate cuts increases again.
CME FedWatch shows that traders have priced 95.2% of the probability that the central bank will cut interest rates by 25 basis point later in the day.
Technical Forecast
Experts say that the pressure to sell gold has not yet subsided.
While it may be possible to exhaust the market if prices maintain their current levels, there is no way of excluding a return to $2,600. A break below this level would increase the likelihood of a fall back to the mid-November lows, around $2.530, or back to the late summer levels, around $2,500,” David Morrison said, senior analyst at Trade Nation.
Morrison stated that if the prices fell to these levels, this could be a sign of the end of bull market.
It would also provide an opportunity for MACD (moving-average convergence divergence), which could be a springboard to another run at $3,000, a target that the bulls have been aiming for for some time.
Gold could reach $3,000 an ounce in the next year, according to several organisations including Goldman Sachs and Bank of America.
Commerzbank, however, expects the average price to be much lower, around $2.650 per ounce, in 2025.
Copper prices fall
Copper prices, among other metals fell on Wednesday due to concerns about a weakening of demand from China, the largest consumer.
The retail sales growth fell short of expectations, but the industrial output was in line with what was expected for last month.
The copper market was impacted by this, with prices falling.
China is struggling with a housing crisis, and despite plans to loosen monetary policies to stimulate economic activity.
Reuters reported Tuesday that Beijing would increase its budget deficit from 3% to 4% of its gross domestic product by 2025, the highest ever. It will also aim for GDP growth of 5% in a third straight year.
This post Gold Prices Flatten Ahead of Fed Decision; Copper Falls on Poor Demand may be updated as new developments unfold.
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