Gold Traders Countdown The Hours To Fed Decision

Gold remains near its lowest level of the month as traders prepare for the Federal Reserve decision tomorrow. The all-important meeting will begin later today as the Fed prepare to raise interest rates for the first time in 7 years. Gold is flat at 1063.60. Gold prices fell to their lowest point in weeks on Monday, a day before the start of the Federal Reserve’s two-day meeting, which many believe will result in the first interest rate increase in years.

Gold fell $12.30, or 1.1%, to $1,063.40 an ounce Monday, their lowest point since December 3. That was a day after prices tumbled toward a six-year low under $1,054 on Dec. 2. Gold lost 0.8% last week. An increase in the Fed’s interest rate drives investors away from gold and toward assets with a return, as the precious metal bears no interest. There has not been an increase in the Fed’s interest rate since June 2006, before the beginning of the U.S. financial crisis. The strong U.S. dollar also added some pressure to gold on Monday.

As for other metals, silver fell 18.9 cents, or 1.36 percent, to close at 13.695 dollars per ounce. Platinum for rose 6.5 dollars, or 0.77 percent, to close at 850.20 dollars per ounce.

Gold isn’t the only precious metal losing value. Silver prices hit their lowest levels since 2009 in trading on Dec. 14.

While the sharp decline in gold miners is a bit premature, it’s a reminder that gold prices are the key driving force behind revenues and profits for the industry. If gold prices do continue to slip even further, it will weigh on all but the best gold miners.

And while economic uncertainty was a big lift for gold prices during and immediately after the Great Recession, relative economic strength could continue to weigh on gold prices. The Fed has so far held off on rising interest rates, stating that it would do so only if the U.S. economy was strong enough to absorb higher rates.

The fear is that that day is upon us, the market for gold is likely to shrink, and there’s just not enough industrial and consumer demand to soak up all of the supply investors were buying. Today’s move down was driven by speculation, but if that speculation turns into reality and demand shrinks even further, the gold-mining industry will see more days like today ahead.

Gold remained weak despite the turnaround of both the dollar falling 0.4 percent against a basket of leading currencies, and U.S. crude turning up after nearing 11-year lows. Assets in the top gold ETF, SPDR Gold Trust, are at their lowest since September 2008 while physical demand from the world’s biggest consumer India was also lacking, with gold prices there swinging to a discount. BofA Merrill Lynch said on Friday it expected the gold price to slide to $950 early in 2016 due to the upcoming U.S. rate rise, joining a chorus of other brokerages, including Goldman Sachs, predicting a drop to, or below, $1,000.

Palladium rose 0.9 percent to $547.10 an ounce while platinum was up 1 percent at $853.50 an ounce.