XAU/USD: Gold Prices Slide Below $2,300 Ahead of Key Rate-Setting Fed Meeting

Precious metal is down about 6% from its record high in mid-April and is floating near a 1-month low ahead of the Fed’s rate decision.

• Gold prices (XAUUSD) moved lower to hit a 1-month low of $2,281 from a Tuesday high of $2,335 per ounce as markets were in adjustment mode ahead of a key event. It’s Fed Day today and investors will be watching for the latest from the US central bank. The Federal Reserve today is deciding on the benchmark interest rate and has signaled that it might keep borrowing costs steady at a 24-year high of 5.5%. More importantly, Fed boss Jay Powell will be giving a speech on the way forward and whether rate cuts could come soon.
• What’s gold’s role? Gold is a non-yielding asset, meaning that holders don’t generate any income, contrary to the US dollar, which yields more in a high-rate environment. In that context, traders may decide to phase gold out of their portfolio and stuff their pockets with dollars. Speaking of the greenback, it’s been making solid progress across the forex board this week, pressuring rival currencies such as the euro and the Japanese yen.
• Back to gold, the yellow metal has dropped about 6% from its record high of $2,430 hit on April 12. Prior to reaching the lofty figure, gold enjoyed an increased buying momentum, which propelled prices by 33% from early October when Israel-Gaza tensions flared up. Besides the expected rate hold, which is keeping a lid on optimism in gold, prices may be weighed down by some well-deserved profit-taking by patient gold bugs.