Gold Steady But Caught Between Fed and Geopolitical Risk

Gold was little changed in New York trading below a three-week high as investors weighed signs tension in Ukraine and the Middle East is easing.

Global equities rose for a second day after Russia said warplanes ended drills near Ukraine and Israel and militants in the Gaza Strip agreed to an Egyptian-brokered truce. Geopolitical unrest helped gold gain 9 percent this year, with prices reaching a three-week high of $1,324.30 an ounce on Aug. 8 as U.S. President Barack Obama authorized air strikes in Iraq.

The dollar touched an almost six-month high against 10 major currencies on Aug. 6 on demand for a haven and the outlook for a strengthening U.S. economy. The Federal Reserve is cutting stimulus that helped gold reach a record in 2011. Futures traders are pricing in a 69 percent chance of an increase in the Fed’s benchmark rate to at least 0.5 percent by September 2015.

“Any signs that the crises could be de-escalating would threaten the recent rally in gold and render the metal vulnerable to a slide,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report today. Data “continued to suggest that the U.S. economy is recovering. If the dollar continues strengthening, the upward thrust in gold is likely to be curtailed.”

Gold for December delivery was little changed at $1,310.60 an ounce by 7:49 a.m. on the Comex in New York. Bullion for immediate delivery dropped 6 cents to $1,309.52 in London, according to Bloomberg generic pricing.

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