Gold falls ahead of Fed statement as Treasury yields rise

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Gold futures lost ground on Wednesday as traders waited for the outcome of a Federal Reserve policy meeting and Treasury bond yields rose further. Gold for June delivery GC00, -0.75% GCM21, -0.75% fell $ 14.10, or 0.8%, to $ 1,764.70 an ounce on Comex. May silver SIK21, -1.80% fell 48 cents, or 1.8%, to $ 25.93 an ounce.

“Having failed to break the psychological barrier of $ 1,800 last week, gold is now in a sideways phase between main support at $ 1,750 and resistance at $ 1,800,” said Carlo Alberto De Casa, chief analyst at ActivTrades, in a note. The Federal Reserve and its chairman, Jerome Powell, are expected to maintain that there is no rush to start thinking about raising interest rates or cutting the central bank’s bond-buying program. The Fed is scheduled to release a statement at 2 p.m. ET, and Powell’s press conference is scheduled for 2:30 p.m. Meanwhile, the recent weakness in gold has reflected an increase in the yield on the 10-year Treasury BX: TMUBMUSD10Y, which has pushed above 1.60%, as well as a recent strengthening of the dollar, said De Casa. Higher returns can be a drag on gold and other commodities because they increase the opportunity cost of holding assets that do not deliver a return. A stronger dollar can be negative because it makes commodities priced in the currency more expensive for users of other currencies. “Despite the recent reversal, the overall outlook remains moderately positive for gold and it is likely to continue to trade sideways until a new catalyst comes along that pulls it out of its $ 50 trading range,” De Casa said.