- Gold price trades sideways around $1,930 as the Fed’s decision looms.
- US Dollar (USD) holds ground above 105.00 on elevated US Treasury yields.
- Fed is expected to maintain interest rates at the current 5.25%-5.50% range in September.
Gold price consolidates below a two-week high, trading around $1,930 during the early hours of the Asian session on Wednesday. The price of yellow metal is under pressure due to improved US Treasury yields ahead of the US Federal Reserve’s (Fed) decision.
US Dollar Index (DXY) continues to hold steady around 105.10, supported by elevated US Treasury bond yields. The yield on the US 10-year Treasury note is at 4.36% by the press time, marking its highest level in 16 years, which poses a challenge to Gold prices.
Fed is expected to keep rates at the current 5.25%-5.50% range in September but to keep them higher for a prolonged period following the recent data, which showed that inflation is resilient.
According to the CME FedWatch Tool, the probability of another rate hike had been lowered in the November and December meetings.
While the Fed’s decision is significant, market participants will closely focus on the ‘dot plots’ to assess the expected interest rate trajectory. In the most recent Summary of Economic Projections (SEP), the Fed’s median estimates indicate that rates could reach a peak of 5.6%.
According to a report from Reuters, US Treasury Secretary Janet Yellen commented on Tuesday that, given the economy was operating at full employment, it was necessary for US growth to moderate to a rate more aligned with its potential growth rate in order to bring inflation back to target levels.
Yellen also said “I think the Chinese would most likely use the policy space they have to try to avoid a slowdown with major proportions. There may be spillovers from China’s economic difficulties to the US.”
Traders will closely monitor the US Federal Reserve’s meeting decision on Wednesday later in the North American session.