Gold prices finish higher as traders await Fed decision

Price action

• Gold for August delivery
  GC00,
  +0.49%

  GCQ23,
  +0.49%
  climbed by $1.50, or nearly 0.1%, to settle at $1,963.70 an ounce on Comex, a day after losing 0.2%.

• Silver futures for September delivery
  SI00,
  +1.09%

  SIU23,
  +1.09%
  gained 24 cents, or 1%, at $24.82 an ounce after losing 1.1% on Monday.

• October platinum
  PLV23,
  -0.34%
  rose $7.10, or 0.7%, to $976.60 per ounce, while palladium for September
  PAU23,
  -2.04%
  gained $12.40, or 1%, to $1,281.20 per ounce.

• September copper
  HGU23,
  -0.32%
  added 6 cents, or 1.6%, to $3.92 per pound.

Price action

“This could be an explosively volatile week for gold due to the Federal Reserve rate decision and incoming key U.S. economic data,” said Lukman Otunuga, manager, market analysis at FXTM. Bulls are “already lurking in the vicinity,” with prices pressing above the sticky $1,960.

Whatever the outcome of the Fed decision, “it is likely to rock zero-yielding gold on Wednesday,” he said in market commentary.

Comments from Fed Chairman Jerome Powell on Wednesday in a press conference following the Fed rate decision may offer some insight about the central bank’s plans for further interest rate hikes.

Read: Everyone thinks the Fed’s rate hike this week will be the final one — except the Fed

Although the Fed left rates on hold in June after delivering 10 consecutive interest-rate hikes, the central bank is widely expected to raise rates by another 25 basis points at this meeting.

Any sign that the central bank is planning further hikes beyond July — perhaps another move at its September meeting, or later — could weigh on gold prices, which have benefited from the latest batch of inflation data showing price pressures easing more quickly than expected.

“The downside risk to gold as we wrap up July will be whether the Fed leaves the door somewhat open for further increases to US interest rates,” Jameel Ahmad, chief analyst at Dubai-based brokerage GTC, said in emailed comments to MarketWatch.

Key U.S. economic data this week include a reading on second quarter gross domestic product on Thursday and the personal consumption expenditure price index on Friday, the Fed’s preferred inflation gauge.

On Tuesday, a survey of U.S. consumer confidence climbed to a two-year high of 117.0 in July.

It would be “wise to keep a close eye” on the key U.S. Q2 GDP, initial jobless claims, durable goods and June PCE data in the second half of the week, said Otunuga. “When factoring in how these key releases may impact Fed hike expectations beyond July’s policy meeting, this could translate to heightened volatility for gold.”