BU: GOLD EDGES HIGHER, MARKET CAUTIOUS AHEAD OF FED MEETING
Gold was just in positive territory on Tuesday morning in London while market participants keep their powder dry ahead of the two-day FOMC meeting that starts today.
The spot gold price was last at $1,165.50/$1,165.80 per ounce, up $1.70 on Monday’s close. Trade has ranged narrowly from $1,162.50 to $1,167.20 so far.
In recent weeks, several members of the Federal Reserve’s policy-setting board have argued that lifting rates is untenable at this time and have urged the organisation to wait until at least 2016 before starting to normalise monetary policy. This has created a positive environment for safe-haven assets such as gold.
Still, chair Janet Yellen has reiterated her hawkish stance numerous times over the past few weeks and made clear her preference for lifting rates before the year ends.
“Gold is receiving some oxygen from the investor uncertainty generated by the perceived divisions at the Fed. We view this as moderately bullish longer term. The longer the uncertainty goes on, the more investors may turn to gold,” HSBC analyst James Steel said.
“Gold received a boost after China’s rate cut at the end of last week but Fed policies are likely to be a greater driving force for bullion than any other nation’s monetary policy,” he added.
China’s central bank lowered interest rates again to stimulate growth, cutting both its one-year lending rate and its one-year deposit by 25 basis points to 4.35 percent and 1.5 percent respectively.
This sixth cut in the past year was probably triggered by the fall in third-quarter GDP growth to 6.9 percent, the lowest since the first quarter of 2009.
Market participants interpreted the September FOMC statement as particularly dovish, with most investors now seeing an interest-rate rise in 2015 as unlikely, according to CME Group FedWatch.
“We don’t expect to see much action in gold until after the Fed meeting and the third-quarter GDP report are both out of the way,” INTL FCStone analyst Edward Meir said.
“Both these variables will likely clarify the Fed’s intentions with regard to when it may be planning to raise rates, which in turn should impact gold’s short-term direction,” he added.
The economic agenda is fairly busy today. The eurozone’s M3 money supply undershot at 4.9 percent while the region’s private loans came in as expected at 1.1 percent.
Out of the US, core durable goods for September, the S&P/CS Composite-20 House Price Index (HPI) for August, and the flash service PMI, the Conference Board consumer confidence, and the Richmond Manufacturing Index for October are due.
In the other precious metals, silver was little changed at $15.89/15.94 per ounce. Platinum at $988/993 was down $3 and palladium edged $1 lower to $676/681.
