MW: Gold tries to restore win streak as central bank decisions remain in focus
Gold futures prices firmed Thursday, trying for a fourth higher close in the last five sessions, as the dollar softened with central bank decision-making in sharp focus.
Gold hit a three-week high earlier this week as investors pared expectations for how aggressively the Federal Reserve would move to increase U.S. interest rates. The rate-setting Federal Open Market Committee will hold their next meeting on Sept. 20-21; the European Central Bank meets today and the Bank of Japan meets later this month.
Early Thursday, December gold GCZ6, +0.17% gained $1.80, or 0.1%, to $1,350.90 an ounce. Gold had gained for three straight sessions before dipping for a lower settlement on Wednesday.
December silver SIZ6, +0.54% firmed 12 cents, or 0.6%, to $19.96 an ounce.
The ICE Dollar Index DXY, -0.33% , a measure of the buck against a basket of currencies, fell 0.4% to 94.60.
The dollar could extend what have been narrow trading ranges as the ECB will deliver its latest monetary policy decision, due at 7:45 a.m. Eastern Time. Conviction is growing that the central bank will prolong its asset-buying program beyond March 2017, but opinion is divided as to whether the move will come at Thursday’s meeting.
“In our opinion this continuation of the ECB’s ultra-expansionary monetary policy will drive up the gold price in euros,” said analysts at Commerzbank, in a note.
Investors this week have also trimmed bets that the Federal Reserve will raise U.S. interest rates when the panel next meets in a couple of weeks after a surprisingly weak report on the U.S. service-sector on Tuesday and little alarm in the latest beige book report. These reports followed data last week that showed slower job growth in August and an unexpected pullback in ISM’s index of monthly manufacturing activity.
“Wage pressure is scant. Inflation pressure is negligible. Housing is slowing because a labor shortage is impeding building of new homes. Demand for credit is sluggish but persistent,” said Gary Wagner of Thegoldforecast.com, commenting on the Fed’s beige book.
“That adds up to no rate hike in September, unless enough theoretical thinkers override the pragmatists,” he said. “There probably will be no rate rise in December either unless somehow Inflation breaks out like a raging bull.”
As for Thursday’s calendar, the Labor Department will issue its report on weekly jobless claims at 8:30 a.m. Eastern. The number of people filing for unemployment benefits is expected to slightly increase to 265,000 in the week ended Sept. 3.
Federal funds futures show that investors see a 18% chance that the Fed raises rates at its Sept. 20-21 meeting, according to CME Group. That’s down from about 30% earlier this week.
A slow-moving Fed is positive news for gold bulls as gold, which doesn’t carry interest, is typically more appealing in a low-rate environment. U.S. currency weakness is also a positive for dollar-priced gold, making it relatively cheaper to buyers using other currencies.
Among exchange-traded funds, the SPDR Gold Trust GLD, -0.34% was up 0.3% and the iShares Silver Trust SLV, -1.42% was little changed. The VanEck Vectors Gold GDX, -0.56% gained 0.5%.
