The gold trading community has assumed a cautious stance in anticipation of Wednesday’s monetary policy update from the Federal Reserve and other central bank rate decisions scheduled for this week.
Gold’s most-active futures contract on New York’s Comex, December, settled at $1,953.70 per ounce, recording a marginal gain of just 30 cents for the day.
The spot price of gold, which is determined by real-time trades in physical bullion and closely monitored by some traders, was at $1,932.09 by 15:49 ET (19:49 GMT). Spot gold experienced a slight dip of $1.65, equivalent to 0.1%, on the day.
On Comex, the most-active December futures contract for gold concluded the day at $1,946.20 per ounce, marking a gain of $13.30 or 0.7%. Over the course of the week, the benchmark gold futures contract witnessed an increase of $3.50, equivalent to 0.2%.
Ed Moya, an analyst at the online trading platform OANDA, commented on the situation, stating, “Gold traders are stuck in a wait-and-see mode as Central Bank-a-Palooza will deliver a make-or-break moment for bullion.” He was referring to the impending rate decisions from the Federal Reserve, Bank of England, Bank of Japan, and People’s Bank of China.
Moya further elaborated, saying, “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.”
Central bank rate decisions are looming large in the minds of global market participants. This comes after the European Central Bank raised rates to a record high of 4% recently, despite signaling that this hike would be its last.
The Federal Reserve’s policy-makers, on the other hand, are not expected to raise rates at their upcoming meeting on September 20th, especially after having implemented 11 hikes that added 5.25 percentage points to a base rate of just 0.25% by February 2022.
However, the financial community will closely scrutinize Chairman Jerome Powell’s statements during his news conference on Wednesday for hints regarding the Fed’s outlook for the remainder of the year, given that two more policy meetings are scheduled for November and December.
With a Fed rate hike seemingly off the table for now, some dollar investors chose to remain on the sidelines while others opted to take profits following the greenback’s eight-week rally.
U.S. consumer prices experienced a second consecutive monthly increase in August, resulting in year-on-year growth of 3.7%, up from 3.2% in July. High gasoline prices, accounting for over half of the increase, were a significant contributor to this rise. This development may exert renewed pressure on inflation concerns at the Fed.
The central bank’s target for inflation remains at a maximum of 2% per year, and it has committed to achieving this target through further rate hikes if necessary.
