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Gold price moves await Federal Reserve decisions

By Daniel Tyson

20:33, 13 December 2021

A stack of gold bars
Federal Reserve moves should be key in determining where the price of gold is heading - Photo: Shutterstock

Gold prices continue to rebound Monday to their highest price in three weeks ahead of the US Federal Reserve’s gathering this week, an event which could determine bullish or bearish momentum for precious metals.

At 3 pm EDT (UTC-5) on Monday, an ounce traded at $1,788.50 (£1,353.46), up slightly, in the most-active contract since 22 November, according to FactSet data.

Potential gains currently limited 

Some gains are occuring, but it appears gold prices will remain stuck in a trading range until investors get a better idea of how high the Fed expects interest rates to go over the next few years.

While an accelerated taper is mostly priced in, traders should be prepared for any “dovish surprises,” wrote Edward Moya, senior market analyst for OANDA, in an email to

Some analysts believe if gold moves higher than $1,810 it could pick up steam and head even higher, but they are doubtful that will happen before the Fed decision on Wednesday. 

“Gold prices have not been a good inflation hedge over the past month and that is largely due to the strong dollar that has emerged from Fed hawkishness. Unless Fed rate hike expectations surge to three, to four rate hikes in 2022, gold should start to grind higher,” Moya said.

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Investors wait for Fed decision

Gold traders and investors are waiting for Wednesday’s monetary policy decision when, they believe, the Fed will give its update on projections of interest rates and the pace of erasing Covid-era stimulus.

Naeem Aslam, chief market analyst at AvaTrade, said the central bank’s meeting will likely be a big driver for the precious metal. “The Fed expects to tighten its monetary policy, which likely means that the American central bank will hike its policy rate sooner than initially expected as well. Thus, because gold is a non-interest-bearing asset, the opportunity cost of holding the precious metal will rise, making it less attractive to investors.”

On Friday, gold traded higher after the US government data showed consumer inflation rate was the highest in 39 years. Data on Friday revealed that in November the inflation rate rose to 6.8%, marking the highest annual rate since 1982 and more than triple the Fed's 2% target and the highest rate since July, 1982. Meanwhile, the consumer price index increased 0.8% in November, higher than some economists' forecast of 0.7%, according to the Wall Street Journal.

The rise in inflation supported gold prices last week as “the yellow metal is considered to be a safe-haven commodity, which investors use to hedge against inflation in times of uncertainty,” Aslam wrote in a client note Monday.

Trading on Comex, March copper dropped nearly 0.1% to $4.284 a pound. January platinum lost 1% to $924.60 an ounce, and March palladium declined by 4.3% to settle at $1,674.70 an ounce, down a third-straight session.

Read more: US market close: Major indexes drop before Fed meeting

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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