Gold Approaches Six-Month High as Fed Uncertainty Weighs on Dollar

Gold prices rose to fresh six-month highs on Wednesday, as investors awaited a decision by the Federal Reserve that could raise more questions about the future path of monetary policy.

Bulls Regain Control

Precious metals rose across the board Wednesday, feeding into a rally that re-emerged late last month. Gold for February settlement climbed $5.90, or 0.5%, to $1,259.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Bullion last traded near these levels in early July. Prices are up 2.9% over the past four weeks.

March silver futures also rose sharply, adding 19 cents, or 1.3%, to $14.89 a troy ounce. The grey metal is approaching its highest level in four months.

Elsewhere, platinum prices rose $5.67, or 0.7%, to $796.52.

Precious metals were aided by a plunging U.S. dollar. The dollar index (DXY), which tracks the performance of the greenback against a basket of six currencies, fell 0.6% to 96.57. A weaker dollar makes investing in gold and silver more profitable for holders of other currencies.

Fed Decision Looms

Gold’s momentous rally comes in anticipation of the Federal Reserve’s final interest rate decision of the year. Policymakers are expected to raise interest rates today for a fourth time this year, though investors’ certainty on the matter has waned in recent weeks. Fed Fund futures prices imply a 78.4% likelihood of liftoff today.

The Fed’s decision will be released at 2:00 p.m. ET.

In addition to its verdict on monetary policy, the central bank will release a quarterly summary of economic projections covering GDP, unemployment and inflation. More importantly, policymakers will convey their outlook on interest rates via the “dot-plot” summary. Officials previously said they expected three rate hikes in 2019 but an updated forecast could show a smaller number of projected raises.

U.S. President Donald Trump is a vocal critical of the Fed’s tightening schedule, and has urged policymakers not to proceed with raising interest rates. The impact of higher interest rates is currently being felt in the real estate sector as banks pass on higher costs indirectly via mortgages. Housing sales have been declining all year long, prompting some analysts to speculate whether the market was heading for a correction.

As it turns out, existing home sales rose unexpectedly in November, according to the latest monthly report from the National Association of Realtors (NAR). Sales of previously-owned homes rose 1.9% to a seasonally adjusted 5.32 million units. Analysts had expected a slight decline of 0.6% from October levels.

Featured image courtesy of Shutterstock.

Chief Editor to and Contributor to, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi