Gold seen trading in tight range until next Fed policy meeting
Gold prices rose slightly Tuesday, as investors’ expectations regarding the timing of a U.S. Federal Reserve rate rise were clouded with uncertainty.
Gold for December delivery was recently up 0.2% at $1,328.80 a troy ounce on the COMEX division of the New York Mercantile Exchange, breaking a four-day losing streak.
According to Bill O’Neill, a broker at LOGIC Advisors, daily buyers are stepping into the market as gold prices have fallen, but longer-term investors are still nervous.
“There’s nothing frenetic in the gold market today,” said Mr. O’Neill.” There’s definitely some money being taken off the table in gold, [but]there’s some new money coming in against it.”
Gold prices have fallen over the past week as comments from Federal Reserve officials sparked concern among investors that the central bank could raise interest rates as soon as this month. Debate on when, or if, the Fed will raise interest rates continues to overwhelm other factors in the market, said David Govett, head of precious metals at Marex Spectron in London.
The Fed’s next policy meeting is scheduled to start Sept. 20. Until then, gold should continue trading in a tight range, Mr. Govett said.
“We now have a week-long moratorium on Fed speeches until the FOMC meeting, which will leave market participants in a quandary. What to watch? What to follow? What to do? The answer is probably, very little,” he wrote in a Tuesday email.
Gold is highly sensitive to the strength of the dollar and the timing of a rate increase. A stronger dollar typically makes the dollar-denominated metal more expensive for other investors, pushing down the price, while the opposite also applies. Because gold doesn’t pay interest, it also tends to be more in demand when rates are low, and wane as rates rise.
While gold received a boost from fears of slowing growth and the Brexit vote earlier this year due to its safe-haven reputation, that demand seems to have waned, said Carsten Menke, a commodities research analyst at Julius Baer.
“No matter the exact timing of the next rate increase, we believe safe-haven demand from investors should fade as growth risks are receding,” Mr. Menke said.
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