Metals market today: Gold touches $1,673, silver rises to $19.3 ahead of Fed meeting

NEW YORK (Sept 21) Precious metals were quite upbeat on Wednesday morning, with gold, silver, platinum and palladium all up, as investors looked forward to the US Federal Reserve September meeting scheduled for later in the day, during which a further interest rate hike is expected to be announced.

Investors are pricing in the possibility of another 75-basis point hike, the third consecutive one of this kind, at about 81% possibility, whereas the probability of a more aggressive 100 basis point hike is coming in at about 19%. The US Fed has gone on record to highlight that it will take any and all measures necessary to combat soaring inflation.

Gold inched up 0.6% to $1,673 per troy ounce, pulling itself up from the near 2 and a half year lows seen recently, however, still had a weekly fall of about 1.8%.

Gold still lingers near two years and half lows

Analyst views on precious metals

According to Piero Cingari, analyst at Capital.com, “All eyes are on today’s FOMC meeting. The market is leaning towards a 75 basis point hike, even though Fed futures are pricing in a marginal probability of a full percentage point hike. I believe the FED will opt for a 75bps hike in the end, but communication will continue to be oriented towards a very hawkish stance, given how inflation surprised in August due to increases in non-energy components.

The new dot-plot on the rate path and projections for inflation, unemployment and economic growth will be interesting to watch. Metals commodities, in my opinion, have already discounted the 75 basis point increase, though the announcement can always cause some volatility in the initial market reactions.After a sharp drop last week, gold continues to trade around its lows from August 21.

However, if the Fed projects significantly lower economic growth while keeping the inflation outlook sticky and well above target, this could represent a paradigm shift for the gold’s trend.”

Capital.com