Gold turned negative on Wednesday after the Federal Reserve increased interest rates but was less dovish than expected following a two-day meeting, and the dollar sharply pared its losses against a basket of major currencies.
It was the second time in three months that the Fed raised interest rates by a quarter percentage point, and the U.S. central bank cited continued economic growth and job market strength. It also announced it would begin cutting its holdings of bonds and other securities this year.
Spot gold fell 0.2 percent at $1,263.03 an ounce, while U.S. gold futures for August delivery settled up 0.6 percent at $1,275.90 prior to the Fed's statement. Bullion rallied earlier when data showed an unexpected month-on-month drop in U.S. consumer prices and retail sales, suggesting inflation pressures are moderating, which stoked expectations that Fed rate policy would remain cautious. The metal peaked at $1,279.37 as the dollar index fell to its lowest since Nov. 9 following the data.
On technical front, gold is expected to test the support of the 50-day moving average of $1,261. The momentum column of the MACD index is expanding under the axis zero, suggesting further losses under downside pressure.
Silver rose 0.4 percent to $16.93 an ounce, reversing major gains earlier that drove it up 3 percent above the 50-day moving average of $17.32 after the Federal Reserve’s unexpected hawkish statement. Silver is expected to fall further with next support at $16.74.

 
Dealing Room, ICBC Beijing Branch
Huang Han

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