Gold Gives Back Gains Ahead of Fed Meeting Next Week

Gold trimmed a second week of gains as investors anticipated the Federal Reserve’s next monetary policy meeting amid an extended slide in oil prices.

Bullion for immediate delivery fell as much as 0.8 percent as crude oil extended losses below $60 a barrel in New York, on speculation that OPEC’s biggest members will defend market share against U.S. shale producers. Falling energy costs typically cut demand for gold as a hedge against rising consumer costs. Commodity producers led European stocks to their worst week since 2012.

“The recent strength in gold was driven by some reallocation of profits away from equity markets,” Mark Keenan, Singapore-based head of commodities research at Societe Generale SA, said by phone. “We view the price in a firm downtrend, which is broadly driven by a framework of a recovering U.S. economy and rising rates.”

Gold for immediate delivery fell 0.2 percent to $1,225.36 an ounce by 11:02 a.m. in London. Gold for February delivery was little changed at $1,225.90 an ounce on the Comex in New York. Futures trading volumes were 17 percent below the average for the past 100 days for this time of day, according to data compiled by Bloomberg.

The U.S. central bank will gather Dec. 16-17 as policy makers debate the timing of the first interest-rate increase in eight years. Rising rates cut gold’s allure because bullion generally offers investors returns only through price gains.

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