Commerzbank provides insights on gold's weakness and expects the metal's performance following the Federal Reserve's decision.

Carsten Fritsch, an analyst in the commodities division at Commerzbank, reported that gold prices have given up their strong gains from the first half of this week, trading close to the level of $2,650 per ounce.

The economic analyst explained that gold prices experienced a significant decline in trading on Tuesday after a slight recovery at the beginning of the week, due to the sharp rise in U.S. Treasury yields, which increases the opportunity cost of holding gold alongside a drop in market expectations regarding U.S. interest rate cuts during the upcoming year.

In this regard, the pricing of federal reserve fund futures now indicates that the U.S. Federal Reserve may only cut interest rates by a total of 50 basis points by the middle of next year.

This already takes into account the anticipated 25 basis point rate cut at the U.S. Federal Reserve meeting tomorrow evening, Wednesday.

Therefore, it will be important to know the interest rate outlook that the new projections provided by members of the Federal Open Market Committee will yield and how U.S. Federal Reserve Chairman Jerome Powell will comment on this during the subsequent press conference following the decision.

If expectations rise and the likelihood of rate cuts in the United States increases again, the price of gold denominated in the greenback may rise as a potential outcome of a decline in the dollar in this case.