Gold Steady on Tuesday Awaiting FOMC

Gold steadied on Tuesday, arresting the previous day’s 1 percent slide as the dollar retreated, but moves were muted as traders awaited the outcome of this week’s Federal Reserve policy meeting.

Gold has fallen 10 percent this year, largely on the back of expectations that the Fed is set to hike rates for the first time in nearly a decade. Rising rates increase the opportunity cost of holding non-yielding bullion. [ECILT/US]

The central bank’s Federal Open Market Committee is expected to announce the rate rise at the end of its two-day policy meeting on Wednesday, but has hinted it intends to hike rates only gradually from there.

Gold could bounce higher after the move as attention switches from the timing of the first rise to the pace of tightening, analysts said.

Spot gold was at $1,062.70 an ounce at 1226 GMT, little changed from $1,062.60 late on Monday, while U.S. gold futures for February delivery were down $1.20 an ounce at $1,062.20.

“Gold continues to be trading in a range until tomorrow,” MKS’ head of trading Afshin Nabavi said. “I would guess the FOMC will hike by 25 basis points. I guess that much is already in the market, so gold could see a push higher and U.S. dollar probably a touch lower.”

via Reuters

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 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