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Title: Gold Down, U.S. Yields Up Ahead of Fed Policy Decision

May 03, 2022 11:54PM ET

By: AnalysisWatch

Gold was down in Asia Wednesday morning as U.S. Treasury yields rose and the U.S. Federal Reserve's upcoming decision dampened demand for the yellow metal.

At 11:47 p.m. ET, gold futures were down 0.27% at $1,865.57.

Yields on 10-year U.S. Treasury bonds rose after hitting the 3% mark in the previous session.

The Federal Reserve is widely expected to announce a significant rate hike later today to curb high inflation when it announces its policy decision. The Federal Open Market Committee will release its policy statement, followed by Fed Chairman Jerome Powell's press conference.

Investors are expecting a decision on raising benchmark overnight interest rates as well as details on reducing the Fed's $8.9 trillion balance sheet.

Jeffrey Halley, senior analyst at OANDA, told Reuters that gold is likely to come under pressure again if the statement shows a more hawkish bias.

If the statement remains largely unchanged, a short-term rally to $1,880 is possible as the dollar is likely to fall.

The dollar, which normally moves inversely to gold, rose slightly on Wednesday but remained near its 20-year high.

On the other side of the Atlantic, the Bank of England will announce its own monetary policy decision on Thursday.

As the Russian invasion of Ukraine enters its tenth week on Feb. 24, Russian troops shelled targets in eastern Ukraine on Tuesday. Meanwhile, the European Union is preparing to impose new sanctions on Moscow that will also affect oil.

In other precious metals, silver slipped 0.1%, while platinum was almost unchanged at $961.62 and palladium gained 0.2%.

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