Gold remains flat as investors cautious ahead of Fed's upcoming rate decision

7 Jun 2023 , 02:25 PM

Gold prices remained relatively unchanged on Wednesday as cautious traders awaited the U.S. Federal Reserve’s upcoming decision on interest rates at its meeting scheduled for next week. The stability in gold was supported by a slight dip in the dollar index, which made gold more affordable for foreign buyers. 

Additionally, a report from the New York Fed indicated a reduction in supply pressures during May, which has been a significant factor influencing global inflationary pressures. 

Investors closely monitored world stocks and Treasury yields, speculating on the continuation of the recent stock market rally and the possibility of a U.S. rate cut in response to volatile price pressures. 

The upcoming U.S. consumer price report for May, scheduled for release on June 13, was expected to provide further clarity on the economy’s health. 

According to CMEGroup’s Fedwatch tool, traders have priced in an 80.6% chance of the Fed maintaining interest rates within a range of 5%-5.25%, while there is a 51% chance of a 25 basis point rate hike in July. 

In a high-interest-rate environment, non-interest bearing assets like gold tend to be less attractive. The SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, reported a slight decline in holdings on Tuesday.