Gold price softens as US Fed begins two-day rate-setting meeting

Gold’s recent rally hit the skids on Tuesday as the US Federal Reserve began its two-day rate setting meeting, with its decision set to be announced around 18:00 tonight (Wednesday 16 March).

After enjoying 13-month highs, the gold price fell to £869.00 per troy ounce at 18:00 on Tuesday and stood at £873.09 at 09:20 this morning.

Tuesday’s fall meant gold hit its lowest price in almost two weeks as the market waited to see whether the Fed would increase the cost of borrowing. There had been concerns that a poor run of economic data would mean that interest rates would remain unchanged, but more positive recent news in the US means that analysts now believe that a rate rise could be on the cards.

Macquarie analyst Matthew Turner told Reuters: "One difference from a few weeks ago is that the surprise (from the Fed) would be a rate hike, whereas perhaps a few weeks ago people thought a surprise would be a rate cut.

"There has been a shift towards hawkishness again, which is probably pressuring gold a little bit."

Traditionally, when the Fed is following a rate increasing arc, it suggests the US economy is also on the up and investors are more likely to put their money into more risky assets. Conversely, when rates are falling or staying static, it tends to benefit the gold price as investors seek a safe haven for their cash.

This slightly lower price seen this week offers a good opportunity to buy gold, as many analysts believe the price of the precious metal will continue to rise this year. If you’re seeking an opportune moment to buy or sell, it’s always worthwhile watching the markets and learning when the best times are to increase or decrease your holding. But like everything in life, there can be no guarantee of whether the gold price will increase or decrease.