Why Are Gold And Silver Prices Down Today?

Gold and silver prices are taking a hit Tuesday, with futures of the precious metals down 1% and 1.5%, respectively. These commodities can be highly sensitive to monetary policy, and it looks like traders are gearing up for the upcoming U.S. Federal Reserve meeting.

Today’s weak movement in gold comes shortly after Friday’s activity saw prices hit a 13-month high after the European Central Bank announced an end to rate cuts, sending the euro rising against the dollar. Because gold is priced in dollars worldwide, it typically responds to these currency fluctuations.

Similarly, volatility has hit the silver market recently. Over the past week, silver prices have explored a wide range, moving about 4% in each direction.

The latest Federal Reserve meeting, which started Tuesday afternoon and will conclude with a public statement on Wednesday, is expected to be an important measurement on the economic conditions in the United States.

While investors are not anticipating that the Fed will hike interest rates again just yet, many are expecting an announcement on the improved outlook of the job market and inflation data. If that news comes tomorrow, it could pave the way for another rate hike later this year.

Higher U.S. interest rates would lead to an increase in the opportunity cost of holding non-yielding commodities, forcing investors out of the gold and silver markets.

When the Fed finally raised interest rates for the first time since 2006 back in December, it was expected that the central bank would stick to its plan of gradually increasing rates over time. When that expectation cooled off over the New Year, gold prices soared, and are currently up about 16% on the year.

What does this all mean? Well, as always, make sure to keep an eye on the Fed’s statement tomorrow, and make sure to check back here for all the latest analysis!