Gold exhibited a lack of clear direction on Monday, following a marginal gain last week, as investors weighed the recent remarks by U.S. Federal Reserve officials hinting at potential further interest rate hikes. These evaluations come in anticipation of a key consumer inflation report scheduled later this week.
Key Points:
Steady Gold Prices: Spot gold remained mostly unchanged at $1,925.12 per ounce by 0723 GMT, with U.S. gold futures also holding steady at $1,945.00.
Weak Investment Demand: Declining holdings in global gold exchange-traded funds (ETFs) underscored a lack of enthusiasm among investors, as higher yields added pressure to the precious metal’s performance. The world’s largest gold-backed ETF, SPDR Gold Trust, reported a drop in its holdings to their lowest level since January 2020.
Fed‘s Caution: Federal Reserve officials reiterated their caution on Friday regarding potential further rate hikes, even though they decided to keep the benchmark rate unchanged last week. Three policymakers voiced uncertainty about whether the battle against inflation has concluded.
Impact of Higher Rates: Higher interest rates tend to deter investments in non-interest-bearing assets like gold, especially since the metal is priced in U.S. dollars. The strong performance of the U.S. dollar, which reached a more than six-month high, and elevated benchmark 10-year Treasury yields near their 16-year peak, further contributed to this pressure.
Speculative Activity: COMEX gold speculators increased their net long positions by 16,843 contracts in the week ending September 19. The majority of this buying activity was driven by short-covering as fund managers reduced bearish bets, according to Saxo Bank’s head of commodity strategy, Ole Hansen.
Bank of Japan’s Policy: The Bank of Japan decided to maintain ultra-low interest rates and reaffirmed its commitment to achieving sustainable inflation at its 2% target.
Upcoming Events: Investors are eagerly awaiting the release of the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, scheduled for September 29. Additionally, the ongoing negotiations among U.S. lawmakers over a spending bill, with a September 30 deadline to avoid a potential government shutdown, remain in focus.
Precious Metals: In the precious metals market, spot silver recorded a modest 0.3% increase, reaching $23.60 per ounce, while platinum experienced a slight 0.1% dip to $925.25. Palladium dropped 0.3% to $1,245.72.
Despite these various factors at play, gold’s trajectory appears to hinge on the forthcoming inflation data and the potential impact of ongoing policy discussions in Washington.
