Gold drops for third day as commodities fall before Fed meeting

Gold declined for a third day as commodities continued to sell-off ahead of a key Federal Reserve meeting where policy makers are set to raise interest rates. 

Bullion has eased after rallying to within $5 of a record last week as Russia’s invasion of Ukraine caused commodities to surge, threatening a combination of low growth and high inflation. Prices of key products including oil have cooled since then, easing those concerns. 

Months of speculation about a new wave of interest-rate hikes look to be coming to a head on Wednesday, when the US central bank is expected to begin tightening. The Fed will seek to rein in decades-high inflation, which is being exacerbated by high commodity prices.

Markets have now priced in seven quarter-point Fed rate hikes in 2022, which “should no longer weigh additionally on the gold price,” Carsten Fritsch, a commodity analyst at Comme­rzbank AG, wrote in a note. “This would change if the Fed were to incorporate a more pronounced rate hike at some point.”

Spot gold declined 1.1 per cent to $1,929.39 an ounce as of 10:28 a.m. in London, after falling 1.9 per cent Monday. Prices touched $2,070.44 last week, near the all-time high reached in August 2020. The Bloomberg Dollar Spot Index slipped 0.2 per cent. Silver and platinum fell.

Palladium climbed 2.1 per cent after dropping 15 per cent Monday, the most since March 2020, as supply concerns eased. Vladimir Potanin, the biggest shareholder in key producer MMC Norilsk Nickel PJSC, said the company is maintaining exports despite the suspension of air links with Europe and the US by re-routing shipments. The European Union exempted the metal from its latest set of penalties on Russian exports.