Gold prices drop ahead of key central bank meetings

Gold prices edged lower today, Sept. 19, ahead of key central bank meetings over the next week, amid expectations of a general trend to tighten monetary policy further to tame soaring inflation.

Gold futures for December delivery shed 0.53% to $1,674.50 an ounce at 9:55 am Makkah time, adding to last week’s 2.6% drop. Spot prices also fell 0.64% to $1,664.28 per ounce.

Silver futures for December delivery settled at $19.38 per ounce. The spot price for palladium dipped by 1.5% to $2,101.88 an ounce, with the spot price of platinum also down 0.64% to $901.13 per ounce.

Meanwhile, the main dollar index, which measures the performance of the US currency against a basket of six currencies, gained 0.42% to 110.09 points.

The Federal Reserve begins its two-day meeting tomorrow, Sept. 20. The central bank will announce its decision on Sept. 21 evening, which is expected to include a 75 basis-point (bp) interest rate hike for the third time in a row.

A 100-bp increase from the US central bank is still in the cards, though this possibility is diminishing as inflation projections by US consumers fell in September to their lowest level in a year.

Swiss National Bank (SNB) and Bank of England (BoE) are also holding monetary policy meetings this week, with expectations that the latter will raise interest rates between 50 and 75 bps.

Although gold is known as a safe haven amid accelerating inflation, high interest rates advance the opportunity cost of holding zero-yield bullion.