Palladium prices fell on Tuesday as the dollar edged lower while investors await the Federal Reserve's policy decisions.

The Fed is starting its two-day policy meeting today and will issue its decisions tomorrow, expected to hike rates to control inflation.

A rate hike might support the dollar, in turn pressuring most commodities and industrial metals. 

Palladium is used heavily in electronics and the car industry for its ability to reduce emissions. 

The dollar index stabilized at 102.2 as of 14:58 GMT, with a session-high at 102.6, and a low at 102.1. 

Palladium futures due in March fell 2% to $1,595 an ounce as of 14:58 GMT. 

What's expected from Palladium in the days to come?

Despite giving up the $2000 barrier and before it the $3000 following the Ukrainian war, analysts still expect palladium to gain ground as demand increase while China eases Covid 19 restrictions. 

Dollar rose in European trade against a basket of major rivals for the fourth straight session, hitting two-week highs and moving off eight-month lows on active short-covering. 

However, the greenback is still heading for the fourth monthly loss in a row after data showed US inflation slowed down for the sixth straight month, hitting 14-month lows.

Such data bolstered the case for a 0.25% rate hike only this week instead of 0.5% as interest rates approach neutrality. 

The Index

The dollar index rose 0.4% to 102.60, the highest since January 18, with a session-low at 102.12. 

The dollar index rose 0.3% yesterday, the third profit in a row away from eight-month lows at 101.50 while US 10-year treasury yields rebounded. 

Monthly Trades

The dollar index is currently down 0.9% in January on track for the fourth monthly loss in a row, the longest such streak since May 2020. 

The dollar was hurt heavily this month and sent to eight-month lows after US inflation data showed a slowdown in December consumer prices for the sixth month in a row. 

Such data reduced pressure on policymakers and bolstered the case for reduced rate hikes and easier policies. 

The Fed

The Federal Reserve is convening this week to decide on policies, expected to issue a reduced rate hike of 0.25% this time around.

Will the dollar sustain more losses this week?

If the Fed's monetary policies and statements were less aggressive than expected, it could send the dollar to fresh multi-month lows. 

Europe's economy grew 0.1% in the fourth quarter of 2022, beating estimates of a 0.1% dip, and after growing by 0.3% in the third quarter. 

Gold prices fell in European trade for the fourth straight session, hitting two-week lows on profit-taking off nine-month highs while the dollar rebounds. 

Despite the decline, the precious metal is heading for the third monthly profit in row as the dollar swoons on prospects of a slower policy tightening pace by the Fed. 

Gold Prices Today

Gold prices fell 0.9% to $1,904 an ounce, the lowest since January 19, with a session-high at $1,927. 

Gold prices lost 0.3% yesterday, the third loss in a row on profit-taking off nine-month highs at $1,949.

The Dollar

The dollar index rose 0.3% on Tuesday, extending gains for the fourth straight session and hitting two-week highs at 102.60 against a basket of major rivals.

Dollar's recovery comes on short-covering while US 10-year treasury yields rebound. 

Monthly Trades

Gold prices are up 4.5% so far in January on track for the third monthly profit in row, the longest such streak of gains since April 2020.

Such gains after two years of heavy losses are due to expectations the Fed will end its cycle of policy tightening and rate hikes soon, sending the dollar sharply down. 

The Fed

The Federal Reserve is convening this week to decide on policies, expected to issue a reduced rate hike of 0.25% this time around.

Actual Demand

Chinese government noted that the current wave of Covid 19 infections in China is getting to an end if no major outbreaks occurred during the lunar near year holiday.

Thus it's expected for actual demand on gold to improve as Chinese economy opens up once more.

The SPDR

Gold holdings at the SPDR Gold Trust fell 1.44 tones yesterday, the second decline in a row to a total of 917.06 tones, a two-week low. 

Will gold prices give up $1,900? 

Most commodity analysts don't expect gold prices to fall below $1,900 ahead of the Federal Reserve's meeting decisions, and if the meeting resulted in signals of ending policy tightening, gold prices are expected to pierce the $1,950 barrier.