Holiday Trade Keeps Market Thin as Gold Remains Supported
In a relatively thin holiday trade on Monday, gold prices held steady, benefiting from a slight retreat in the U.S. dollar. Market participants are growing more confident that the Federal Reserve may have concluded its cycle of raising interest rates.
As of 9:52 a.m. EDT (1352 GMT), spot gold showed little change, trading at $1,939.61 per ounce, after reaching a one-month high of $1,952.79 on Friday. Meanwhile, U.S. gold futures registered a modest decline of 0.1%, settling at $1,965.70 per ounce. Many U.S. markets were closed for the Labor Day holiday.
Traders appeared to bet on Friday that the Federal Reserve is likely finished with its interest rate hikes. This sentiment emerged following an increase in the U.S. unemployment rate and moderate wage growth, which suggested that labor market conditions may be easing.
The U.S. dollar index also eased by 0.2%, contributing to the support for gold. A weaker dollar makes gold, which is priced in dollars, more appealing to holders of other currencies.
Craig Erlam, senior markets analyst at OANDA, noted that the shifting expectations for the first rate cut from the Fed and the pace of rate cuts thereafter will be more influential for gold in the future. He added, “September is almost nailed on at this point,” referring to the Fed’s upcoming monetary policy meeting on September 19-20, where market expectations primarily point to no changes in interest rates.
Data releases since the last policy meeting have contributed to the perception that the U.S. economy is cooling without experiencing a severe downturn. This has strengthened the case against further interest rate increases and has supported gold, which offers no interest.
Tim Waterer, Chief Market Analyst at KCM Trade, emphasized that the precious metal’s trajectory will be influenced by developments in Treasury yields leading up to the September Federal Open Market Committee (FOMC) meeting.
