Gold Futures Settle Higher As Dollar Eases Ahead Of Fed Announcement

Gold prices climbed higher on Wednesday as the dollar shed ground against its major counterparts amid speculation the Federal Reserve might signal a pause in policy tightening sometime soon.

The Fed is widely expected to raise interest rates by 25 basis points today, but analysts expect a rate cut sometime later this year.

The dollar index dropped to 101.36 around late morning and is currently at 101.41, down more than 0.5% from Tuesday’s close.

Gold futures for June ended higher by $13.70 or about 0.7% at $2,037.00 an ounce.

Silver futures for July ended up $0.062 at $25.681 an ounce, while Copper futures for July settled at $3.8450 an ounce, down $0.0175 from the previous close.

CME Group’s FedWatch Tool is currently indicating an 85.4 percent chance the Fed will raise rates by 25 basis points and an 82.39 percent chance the central bank will subsequently leave rates unchanged in June.

“The Federal Reserve will announce its latest interest rate decision later today and investors will be hanging on their every word in light of recent banking sector instability,” said Craig Erlam, Senior Market Analyst at OANDA.

A report from payroll processor ADP showed private sector employment in the U.S. increased by much more than expected in the month of April.

ADP said private sector employment surged by 296,000 jobs in April after climbing by a revised 142,000 jobs in March. Economists had expected private sector employment to advance by 148,000 jobs compared to the addition of 145,000 jobs originally reported for the previous month.

A separate report released by the Institute for Supply Management showed U.S. service sector activity grew at a slightly faster rate in the month of April.

The ISM said its services PMI crept up to 51.9 in April from 51.2 in March, with a reading above 50 indicating growth in the sector. Economists had expected the index to inch up to 51.8.

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