Gold Price News: Gold Eases by 0.3% as Investors Brace for US Rate Decision

Gold prices were marginally lower on Tuesday, as the markets awaited fresh direction and ahead of a US interest rate decision on Wednesday.

Prices eased to an intraday low of $2,634 an ounce on Tuesday, down slightly from around $2,653 an ounce in late trades on Monday. Later on Tuesday, they regained some ground to around $2,645 an ounce.

The gold market was relatively subdued at the start of the week, compared with last week’s gains of almost $100 an ounce to over $2,730 an ounce and subsequent fallback.

US Fed set to cut rates, but outlook uncertain

The financial markets were watching out for Wednesday’s US Fed interest rate decision, which is widely expected to constitute a 25-basis point cut. However, the outlook for US monetary policy next year looks less certain. Recent strong economic data from the US have cast doubt on the need for further interest rate cuts, and other potentially inflationary factors have contributed to this outlook, which could weigh on non-yield-bearing assets like gold.

At the same time, ongoing geopolitical risks linked to conflicts in Ukraine and the Middle East continue to limit gold’s downside.

Market positioning

Investment in gold-backed ETFs showed a slowing of outflows in recent days, with net outflows of 1.7 tonnes in the week to December 13^th, compared with larger net outflows of 8.4 tonnes in the week to December 6^th, according to World Gold Council figures: Gold ETF: Stock, Holdings and Flows.

Meanwhile, in the futures market, open interest in gold futures across all the main exchanges increased to $167.2 billion in the week to December 13^th, compared with $160.2 billion in the previous week, according to WGC figures.

Upcoming events

Looking ahead, the US Fed’s interest rate decision on Wednesday will be closely watched, although its announcements are scheduled to take place after the European markets have closed. Also of interest will be the FOMC’s economic projections and the Fed’s press conference on Wednesday evening which may provide clues about the outlook for further changes in the coming months.