Gold Price Falls as Investors Await Interest Rate Clues from Fed
Interest rates will be up for discussion at an upcoming three-day meeting of global central banks in Jackson Hole, Wyoming.
The gold price retreated on Thursday (August 24) ahead of a global meeting of central banks in Jackson Hole, Wyoming. Investors are waiting for hints about future interest rate hikes from the US Federal Reserve.
As of 3:00 p.m. EST, gold was trading at $1,285.92 per ounce, pressured by a firmer US dollar. That’s because a stronger greenback makes the yellow metal more expensive for investors using other currencies.
The annual three-day Jackson Hole meeting will feature speakers from central banks around the world. On Friday (August 25), Fed Chair Janet Yellen and European Central Bank Chief Mario Draghi will discuss the outlook for monetary policy and interest rates.
With the Fed and ECB “on the cusp of making new policy announcements, their views will be pored over for the slightest hints,” said Craig Erlam, senior market analyst at Oanda.
“Markets don’t seem overly concerned about the Fed’s balance sheet plans so interest rate clues [are] what people will be looking for, whereas with ECB, it’s all about tapering — when will it happen, how much will it be and how long will it last,” he added.
The Fed has increased rates twice so far this year, and another hike could impact the gold price. In general, higher interest rates increase the opportunity cost of holding non-yielding bullion.
“The market is pricing in the Federal Reserve’s actions at the Jackson Hole meeting and people are expecting some kind of tightening going on in that space,” noted Richard Xu, a fund manager at China’s biggest gold exchange-traded fund, HuaAn Gold.
But the gold price received some support after US President Donald Trump threatened to shut down the government if his administration does not get funding for a border wall with Mexico.
“The price of gold appears stuck in the mud, looking for any bit of news that can get the wheels spinning again,” said Walter Pehowich, executive vice president of investment services at Dillon Gage Metals.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.