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Dollar slips ahead of Fed decision as gold hovers near $4,000

Futures imply only a 1 in 3 chance of a July rate hike, while gold is expected to be pressured by either hawkish rhetoric or a weakening dollar depending on the Fed outcome.

Reported · Written up by our desk · Major Pairs

The US dollar retreated as traders trimmed positions ahead of the FOMC decision covering the 28 to 29 July meeting, according to ActionForex. The futures market places the odds of a Fed rate hike at roughly 1 in 3, and the move is tied to speculation about a potential surprise as well as a reduction from record net long positions in the greenback, the highest since 2015.

ActionForex cites data suggesting rates may be held steady, including cooler June employment after strong spring growth and slowing inflation. Several FOMC officials have said policy is in the right place, and Kevin Warsh did not indicate tightening in testimony before Congress, while other advocates argue the start of tightening would show the Fed can deploy resources to bring inflation back to the 2% target.

The Fed’s rhetoric is positioned as a key driver for gold, which has been under pressure and is not expected to stray far from the $4,000 per ounce area. The article notes that without a 25-basis-point July increase, the Fed could need to lift rates by 50 basis points in September, and that hawkish language could have negative implications for gold even if rates stay unchanged.

ActionForex also links gold’s recent behavior to external demand and risk factors, saying it reacted calmly to higher oil prices tied to Iran strikes on US bases in Jordan and to Hong Kong’s increase in gold bar imports to their highest level since late 2014, a sign of demand from mainland China. The piece adds that if gold flows from West to East, such as from ETFs to Asian consumers, a downward price trend is the most common outcome.

Latest closeGold $4,023.80 ▼1.2%

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