Investing.com – Gold prices traded slightly below breakeven on Wednesday, as the dollar edged higher ahead of the Federal Reserve’s rate decision later during the session but weaker-than-expected housing data capped losses.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange fell by $2.06, or 0.59%, to $1,249.82 a troy ounce.
Gold futures struggled for direction ahead of the Fed interest rate decision due later during the session, as investors awaited fresh clues on monetary policy.
A tick lower in treasury yields, however, suggested that market participants expect a dovish central bank policy statement concerning future rate hikes, after a string of recent inflation data undershot expectations.
The Fed is expected to stand pat on its balance sheet unwinding plan, as analysts continued to expect the central bank will move to normalize its balance sheet in September.
“The Fed has worked too hard to lay the groundwork for a smooth launch to take a chance by surprising the market about the timing,” said Lou Crandall, chief economist at Wrightson ICAP (LON:NXGN).
In a falling interest rate environment, investor appetite for gold rises as the opportunity cost of holding the precious metal decreases relative to other interest-bearing assets such as bonds.
Ahead of the Fed’s decision on interest rates, investors mulled over downbeat housing data pointing to continued supply constraints in homes available for sale.
The Commerce Department said on Wednesday new home sales rose 0.8 percent to a seasonally adjusted annual rate of 610,000 units last month. May's sales pace was revised down to 605,000 units from the previously reported 610,000 units.
In other precious metals, silver futures eased 0.54% to $16.456 a troy ounce while platinum futures dipped 0.79% to $924.45.
Copper traded at $2.871, up 0.86%, while natural gas, fell by 1.19% to $2.896.