Gold prices at its lowest level since 2½-year

Gold prices on Wednesday lingered near their lowest level since April 2020. Moreover, investors prepared for the likelihood of another super-sized interest rate rise from the Federal Reserve in its effort to tackle inflation.

Spot gold stabled at $1,663.68 per ounce, as of 0324 GMT. Earlier in the day, bullion hovered close to a 2½-year low touched last week.

U.S. gold futures ended also trading flat at $1,671.90.

The Fed will announce its policy decision at 1800 GMT on Wednesday, followed by chair Jerome Powell’s press conference.

Rate futures traders are putting prices in an 81 percent chance of another 75 basis-point hike and a 19 percent probability of a 100 bps increase.

“The market wants the Fed to rip the band aid off so it can have clarity as to the future state of rate decision making and the direction for the broader economic outlook,” director at corporate advisory firm AirGuide Michael Langford stated.

“For gold presently the market is treading water until the Fed policy decision and then will likely respond with a heightened level of volatility before more likely re-trending positively as investors seek to put money to work.”

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, dropped 4.63 tons on Tuesday, their biggest one-day outflow since July 18.

“It seems unlikely that gold ETF inflows will sustainably rebound until traders crystalize a turn in the Fed tightening cycle and/or there is consensus on a U.S./global recession,” analysts at Citi Research noted.