#Metals Stocks: Gold settles at a nearly 2-week low ahead of this week’s Fed decision

The Fed will end its two-day, monetary-policy meeting on Wednesday and Chairman Jerome Powell said last month that the bank needed to shift its focus toward preventing rising inflation which has reached its highest level since 1982, by at least one measure.

See: 5 things to watch for when the Federal Reserve announces its policy decision Wednesday

Also see: Fed has to start hiking rates steadily early next year to combat inflation, former official says

The Fed is expected to “start raising interest rates earlier than expected in order to control inflation,” Chintan Karnani, director of research at Insignia Consultants, told Marketwatch.

So for gold, there is “repositioning” before the meeting, he said, and gold’s inability to break the $1,800 mark has “resulted in short term traders avoiding gold.”

Karnani expects gold to “rise and break past $1,800 before the end of the year on higher safe haven demand.” Even so, “doubts remain whether the gold price will be able sustain a price move over that level,” he said.

February gold 
GCF22,
-0.92%

GC00,
-0.92%
fell $16, or 0.9%, to settle at $1,772.30 an ounce on Comex, for the lowest finish since Dec.2, FactSet data show. Prices saw a 0.2% gain a day earlier, which marked the highest settlement for a most-active contract since Nov. 22.

“Should the Fed step up the gear on tapering, this is likely to punish gold prices as the dollar appreciates, yields rise and rate hike expectations jump,” said Lukman Otunuga, manager, market analysis at FXTM.

For now, support for gold can be found at $1,765, with resistance around the psychological $1,800 level, he told MarketWatch.

Gold prices extended their decline shortly after data released Tuesday showed that the U.S. producer price index climbed 0.8% last month, exceeding the average 0.5% rise forecast by economists polled by The Wall Street Journal. The increase in wholesale prices in the past 12 months rose to 9.6% from 8.8%, marking the biggest advance since a major change in the index in 2009.

Meanwhile, March silver 
SIH22,
-1.96%
declined by 40 cents, or 1.8%, lower at $21.924 an ounce, after climbing 0.6% on Monday.

The European Central Bank, Bank of England and Bank of Japan are also scheduled to meet this week.

“The markets will have a lot to chew on over the latter part of the week,” said Edward Meir, analyst at ED&F Man Capital Markets, in a note.

“Of the three banks besides the Fed, the Bank of England seems to be the furthest along on the ‘hawkish track’,” he said. “It passed on raising rates last month but could do so this time around.”

The Bank of Japan “does not have much of an inflation issue to worry about as Japanese companies have not passed on much of their cost increases to consumers, but nonetheless, some are saying that the BoJ could signal a slight reduction in its asset purchasing program,” said Meir. But he expects the central bank to “stay the course.”

Meanwhile, the ECB “has been the most reluctant to move, still clinging to the ‘inflation is transitory’ mantra,” he said.   

In other Comex dealings, March copper
HGH22,
-0.53%
fell by 0.6% to $4.258 a pound. January platinum
PLF22,
-1.30%
lost 1.5% to $910.90 an ounce and March palladium
PAH22,
-3.09%
shed 3.1% to $1,622.70 an ounce.