Gold Flat Ahead of Next Week’s FOMC

Gold traded little changed near a seven-month low on speculation that the Federal Reserve is moving closer to raising interest rates, eroding demand for the metal as an alternative to stocks and bonds. Silver rebounded from a 14-month low.

Data today may show U.S. retail sales improved. The Bloomberg Dollar Spot Index rose to a 14-month high as traders increased bets that the Fed will raise borrowing costs by July 2015 after holding them near zero since 2008. Gold slumped 28 percent last year on expectations the central bank would reduce monthly asset purchases, which it has done six times.

“Gold prices will likely fall if the Fed becomes more hawkish on its interest rate outlook,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia, wrote in an e-mail today. “So far this year, gold prices have fluctuated largely on safe-haven demand as tensions escalate and ease.”

Gold for December delivery was little changed at $1,238.90 an ounce by 7:13 a.m. on the Comex in New York, after earlier today declining to $1,232.80, the lowest for a most-active contract since Jan. 23. Silver was 0.2 percent higher at $18.63 an ounce, after falling earlier today to the lowest since June 2013.

Holdings of silver in exchange-traded funds rose for a third day to 19,898.9 metric tons yesterday, the highest since November.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza