NEW YORK: Gold prices fell Wednesday as a firmer dollar and jitters ahead of the Federal Reserve’s monetary policy statement weighed on investor appetite for the precious metal.
The most actively traded contract, for August delivery, was recently down $6, or 0.6%, at $1,090.20 a troy ounce on the Comex division of the New York Mercantile Exchange.
Gold prices have plunged to five-year lows on expectations that Fed officials would soon raise interest rates for the first time in nearly a decade.
The precious metal, which doesn’t pay income and costs money to hold, benefited from the historic period of near-zero interest rates as it had an easier time competing with yield-bearing assets such as Treasury bonds.
Now that the U.S. central bank appears closer to raising rates, however, investors have been shedding their gold holdings in favor of economically sensitive assets like stocks.
The Federal Open Market Committee, the Fed’s monetary policy setting arm, is due to conclude a two-day meeting later Wednesday and release a statement at 2 p.m. ET.
Most economists don’t expect the U.S. central bank to raise interest rates till September, according to a poll.
However, gold traders worry that Fed officials will present a more optimistic view of U.S. economic health, opening the door for a more rapid pace of rate increases.
”Everyone is in a wait-and-see mode ahead of the Fed,” said Dave Meger, director of metals trading with High Ridge Futures in Chicago.
A stronger dollar, which advanced against other currencies, also weighed on gold prices.
Gold is traded in dollars and becomes more expensive for investors who use other currencies to fund their purchases when the dollar strengthens.