Gold futures inched lower on Tuesday, easing back after a three-session rise lifted prices to their highest settlement in more than two weeks, as traders awaited this week’s Federal Reserve decision for clues on interest rates.
Gold for December delivery
declined by 80 cents, or less than 0.1%, to $1,952.60 an ounce on Comex, after ending Monday’s session at its highest since Sept. 1.
was down 5.3 cents, or 0.2%, at $23.445 an ounce.
traded at $3.744 a pound, down 0.9%.
rose 0.9% to $974.10 an ounce, while December palladium
traded at $1,266 an ounce, up 1.8%.
Gold has largely traded sideways since spring, and is off around 0.5% so far in September. It’s seen pressure as Treasury yields advanced and the U.S. dollar strengthened. Higher yields raise the opportunity cost of holding nonyielding assets like gold, while a stronger dollar makes commodities more expensive to users of other currencies.
“For the opportunity cost of holding gold to fall, bond yields will need to go down and fast,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in market commentary. “Otherwise, there is a good chance the precious metal will start to head lower again from around these levels.”
Investors are “wary of the dollar, which remains strong, albeit off its best levels,” he said.
Razaqzada pointed out that the benchmark U.S. 10-year bond yields broke out briefly on Monday to hit levels not seen since 2007, before easing lower. “The Fed’s rate decision on Wednesday, and that of several other central banks this week, could cause global bond yields to move sharply. That, in turn, could determine the direction of gold prices.”
The Fed is fully expected to leave its policy interest rates unchanged Wednesday when it concludes a two-day policy meeting, but investors will be looking for clues as to whether a further rate increase may be in store.
See: 4 things to watch for at this week’s Fed monetary-policy meeting
“The question now for gold traders is whether the Fed is willing to acknowledge that it’s probably done with rate hikes, as we heard from the ECB last week, or continue to insist another is likely,” said Craig Erlam, senior market analyst at Oanda, in a note.
“The dot plot will be key to this but as always, traders will hang on Powell’s every word. A hawkish tone from the Fed could put $1,900 in jeopardy,” he wrote. The dot plot is the graph of interest-rate projections from individual Fed policy makers.
Read the full article here