Gold erases gains after Fed hikes interest rates

Key Points
  • Gold erased gains after Fed hikes interest rates
  • ECB, BOJ policy meetings due later this week
  • Dollar at 3-week high versus yen
Source: World Gold Council

Gold prices erased their gains on Wednesday after the U.S. Federal Reserve announced it raised its benchmark short-term interest rate by a quarter percentage point.

The Fed also indicated that two more rate increases are likely.

Spot gold was down 0.08 percent at $1,294.70 an ounce at 2:17 p.m. ET, down nearly 0.3 percent from shortly before the Fed's announcement.

U.S. gold futures for August delivery were 0.11 percent lower at $1,298 per ounce.

The dollar, which measures the greenback against a basket of six major currencies, was up 0.1 percent at 110.55 , after touching 110.68, its highest since May 23.

Gold is highly sensitive to U.S. interest rates, which lift the opportunity cost of holding non-yielding bullion and boost the dollar, in which it is priced.

The European Central Bank (ECB) meets on Thursday, when it could signal intentions to start unwinding its massive bond-purchasing program.

The Bank of Japan's two-day monetary policy meeting also begins Thursday.

The yellow metal is expected to drop sharply towards a range of $1,263-$1,278 per ounce as its consolidation within a wedge is ending, Reuters technical analyst Wang Tao said.

In other precious metals, silver flattened out at $16.854 an ounce. It hit a seven-week high of $16.95 in the previous session.

Palladium was down 0.86 percent at $1,009.

Platinum was 0.49 percent higher at $898.40 per ounce, after hitting a one-week low of $889.40 earlier in the session.

The relationship between stocks and gold is doing something it hasn’t done in 13 years