Waiting Game: The gold trading community appears to be in a holding pattern ahead of this week’s monetary policy update from the Federal Reserve and other central bank rate decisions.
The most-active gold futures contract on New York’s Comex, December, settled at $1953.70 per ounce, with a minimal increase of just 30 cents for the day.
As of 15:49 ET (19:49 GMT), the spot price of gold stood at $1,932.09. Spot gold, which is closely monitored by some traders as it reflects real-time trades in physical bullion, saw a slight dip of $1.65, or 0.1%, for the day.
December’s most-active futures contract on New York’s Comex settled at $1946.20 per ounce, marking a modest gain of $13.30, or 0.7%, for the day. Over the week, the benchmark gold futures contract showed a rise of $3.50, or 0.2%.
Spot gold, which hit a high of $1,930.90 an ounce earlier in the week, maintained a level of $1,924.22 by 13:55 ET (17:55 GMT), resulting in a 0.4% increase for the week.
Ed Moya, an analyst at the online trading platform OANDA, noted that “Gold traders are adopting a wait-and-see approach as Central Bank-a-Palooza unfolds, presenting a potentially make-or-break moment for bullion.” This referred to the impending rate decisions from the Fed, Bank of England, Bank of Japan, and People’s Bank of China.
Moya further explained, “The 10-year Treasury yield is hovering right at the August highs, potentially poised to set new cycle highs. The focus for gold traders will start with the Fed, but then quickly shift to the BOE and BOJ policy decisions.”
He added, “If optimism grows that most of the advanced world is done raising rates, that would be good news for gold. That might be hard given the Fed and BOE might refrain from signaling that they are done hiking just yet. If Wall Street begins to worry about hard landings, then gold, despite some dollar strength, might start attracting some safe-haven flows.”
Anticipating Central Bank Decisions: Global markets are adjusting their expectations for rate hikes following the European Central Bank’s recent decision to raise rates to a record high of 4%, even as it suggested that this hike would be the last.
The Fed’s policymakers are not expected to raise rates at their upcoming meeting on September 20, especially after having implemented 11 hikes that added 5.25 percentage points to a base rate of just 0.25% by February 2022.
However, all eyes will be on Chairman Jerome Powell’s statements during his news conference on Wednesday for insights into the Fed’s outlook for the remainder of the year, especially with two more policy meetings scheduled for November and December.
With a Fed rate hike seemingly off the table for now, dollar investors are staying cautious, while others are capitalizing on the greenback’s eight-week rally.
In August, U.S. consumer prices rose for the second consecutive month, reaching a year-on-year growth of 3.7%, up from 3.2% in July. This increase was primarily driven by high gasoline prices, which accounted for over half of the overall rise. This development could renew pressure on inflation concerns at the Fed.
The central bank’s target inflation rate remains at a maximum of 2% per year, and it is committed to using further rate hikes if necessary to achieve this goal.