Gold prices end at lowest in over a week as dollar strengthens ahead of Fed decision Wednesday

By Myra P. Saefong and Joseph Adinolfi

Precious metals traders weigh JPMorgan takeover of First Republic

Gold futures gave up early Monday gains to finish at their lowest in more than a week, pressured by strength in the U.S. dollar ahead of what's expected to be a decision by the Federal Reserve on Wednesday to raise interest rates.

With much of Europe celebrating the May Day holiday, precious metals traders in the U.S. also kept an eye on developments in the financial sector after news that JPMorgan Chase & Co. (JPM)won an auction to take over troubled First Republic Bank's (FRC) business and deposits.

Price action

Market drivers

It's the May Day holiday in most of Europe, and "with London's bullion market shut that's left Comex speculators to push the [gold] price around in thin trade," Adrian Ash, director of research at BullionVault, told MarketWatch.

While both gold and silver were holding below their recent highs, gold continues to show real underlying strength, reaching "new all-time record high in all currencies across April on a month-average basis to top $2,000 per ounce for the first time," he said.

However, like all financial assets, "gold and silver face a key risk event around Wednesday's Fed decision and, more importantly, in the accompanying statement and press conference," said Ash.

How Powell's comments balance the collapse of First Republic Bank "against the resilience of core inflation is likely to decide May's tone to the 'pivot' versus 'higher for longer' debate," he said.

Fed policy makers on Wednesday were expected to announce another 25-basis-point rate increase.

Read:Fed expected to raise interest rates again this week -- perhaps for the last time this cycle

Precious metals prices were trading higher early Monday, following the news of JPMorgan's takeover of First Republic, which had been teetering on the edge of collapse for weeks.

Read:Gold ends April with little fanfare, but record-high prices may be 'inevitable'

Gold traders will be tuned in to any more news about First Republic Bank as well as the continuing earnings season in the U.S., said Tim Waterer, chief market analyst at KCM Trade, in emailed commentary.

Gold's moves going forward will be "largely dependent on what the Fed has to say later in the week," he said. Gold is "poised to pounce" on any U.S. dollar weakness should the FOMC signal that U.S. rates are at or near the terminal level."

For now, the dollar strengthened, putting pressure on dollar-denominated prices of gold. The ICE U.S. Dollar index was up 0.5% at 102.15.

Investors are looking ahead to the release of a key U.S. Labor Department report Friday.

See the U.S. economic calendar

On Monday, the Institute for Supply Management's manufacturing survey showed a climb to 47.1% from 46.3% in the prior month. Yet numbers below 50% signal contraction in the industrial side of the economy.

-Myra P. Saefong

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05-01-23 1415ET

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