Precious metals held on to gains Wednesday. The greenback weakened ahead of the Federal Reserve's monetary policy statement. Investors widely expect the Fed to increase interest rates by a quarter point at the close of the two-day meeting.
Investors will dissect the statement to look for clues of monetary policy tightening over the remainder of the year.
Anticipation of the Fed's statement has sent the U.S. Dollar Index down 0.38% to 89.67. The index weighs the dollar's strength against a basket of six other major currencies.
Gold prices are strengthening as investors buy gold bars when the dollar is weaker. Likewise, gold is less expensive for foreign holders when the currency weakens. Comex gold futures are holding at $1,321.40 per troy ounce, up 0.72%. Gold hit two-week lows in the previous session, falling to $1,306.8.
Investors are also awaiting $60 billion in new tariffs on Chinese imports. The tariffs will target intellectual property, telecommunications and technology.
A report from Reuters is further strengthening precious metals. The publication announced major banks earned more from precious metals than oil last year. Metals-related revenue surpassed the oil sector for the first time since 2014.
The report cited low and stable prices as the main reason investors flocked to precious metals last year.
Poor performance in the commodity sector in recent years has led to a steady decline in commodity revenue from banks. Banks are exiting the commodity business due to fears of increased regulations. Oil brought in $1.4 billion from the top 50 investment banks in the world. Metals accounted for $1.6 billion, with revenue primarily derived from trading and selling precious metals.
Banks have seen steady metal income, as revenues from storing silver and gold has remained stable. Prices have surged for industrial metals since early 2016, leading to stable gains. Volatility expectations are expected to increase revenue in both metals and oils in 2018. Analysts expect commodities-related revenue to increase by nearly 10% this year.
Gold prices have fallen 4% on expectations of a faster U.S. rate hike increase. Higher interest rates cause non-interest-bearing bullion demand to drop, while the U.S. dollar rises. Gold's recent increase in investment comes as holders await the Fed's announcement. If the Feds do not maintain an aggressive stance on rate increases, gold prices are expected to increase.
Silver futures have soared on the day, rising 1.45% to $16.420 a troy ounce. Platinum futures are up 0.44% to $949.50 a troy ounce after slipping slightly in early morning trading. Copper prices are up 0.33% to $3.048 per troy ounce.
Existing home sales data for February was released on Wednesday, showing sales rose 3% from January, snapping a two-month streak of losses.
Several funds are rallying on increased gold and silver prices. iShares Silver Trust (SLV, Financial) is up 1.40% to $15.49. SPDR Gold Shares (GLD, Financial) has increased 0.93% to $125.46 a share.
Disclosure: The author has no stake in any of the listed equities.
