Gold Hits 6-Month Highs Ahead of Fed

Investing.com – Conviction that the Federal Reserve will turn dovish again is spurring gold bugs to act, more than the concerns of an immediate rate hike.

Benchmark COMEX for February were up $2.80, or 0.2%, at $1,256.40 per troy ounce by 1:11 PM ET (19:00 GMT), after hitting a six-month high earlier at $1,262.10

Futures of the yellow metal crossed $1,260 per troy ounce the first time since December, ahead of the Federal Reserve’s rate hike decision at 2:00 PM ET (19:00 GMT), 30 minutes after COMEX gold’s settlement.

The Fed is expected to raise interest rates for a fourth time this year at the end of its December meeting today, with the market betting on a quarter-point hike.

The , a contrarian bet to gold and other commodities, hit six-week lows in Wednesday’s morning trade in anticipation of the announcement. If the Fed does as expected, gold prices may not see much of a move in post-settlement trade.

But if the central bank stalls for any reason or issues an excessively dovish outlook for 2019, consistent with speeches by its officials of late, then gold may rally further.

“The Fed has a lot of flexibility, inflation has cooled off over the last three months, oil prices are down, the dollar is strong and there has been some softening in the housing sector. So inflation pressures seem to be moderating and already below the Fed’s target,” said Walter Pehowich, precious metals analyst at Dillon Gage Metals in Addison, Texas. “So if they want to pause they will be able to do that and I expect the markets will look at it quite favorably.”

“If the Fed indicates they are done raising rates I expect a softening of the dollar index and this should help the price of gold to catch a bid and move to the upside.”

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