Mar 20, 2018

Gold Prices Dip in March Amidst Uncertainty Prior to US Fed Meet

Gold prices have dipped over the past two weeks and more, reaching a new low for the month at US$ 1,307.51 an ounce, before inching up to  US$ 1,316.60 at closing time in New York on Monday, March 19. The dip comes amidst uncertainty over the outcome of the two-day Federal Reserve meeting being held on March 20-21, 2018, which is expected to give some sense of the broad direction that US monetary policy will take for the rest of the year.

Many commentators believe that the drop in prices means that the market has factored in an anticipated rate hike; and the direction they will take in the coming days will be determined by indications of how many additional rate hikes can be expected during the year.

It may be recalled that the new Fed Chair Jerome Powell has already indicated a possibility of four rate hikes this year with the first to be implemented in March.

Higher interest rates will strengthen the dollar and hit gold’s attractiveness as a safe haven. Over the past couple of weeks, in fact, gold prices have moved within a narrow $25 range, reflecting the uncertainty and mirroring the upward and downward movement of the US currency and stock markets.

However, some analysts feel that there will be an immediate spike in prices post the meeting, particularly if the outcome is as expected or better than that.