Gold Below $1,100 Awaiting FOMC

Gold steadied on Tuesday near 5-1/2-year lows as markets braced for this week’s two-day Federal Reserve meeting, at which policymakers are expected to give further clues on the timing of a U.S. rate increase.

The Fed suggested earlier this year that a near-term rate rise was on the cards if economic data supported such a move, but slowing growth in China and a recent drop in commodity prices have led some to question whether it will be pushed back.

The dollar rose from a two-week low against the yen on Tuesday as investors focused on the meeting.

Spot gold was at $1,092.90 an ounce at 1147 GMT (0747 EDT), little changed from late Monday, while U.S. gold futures for August delivery were down $4.30 an ounce at $1,092.10. Gold hit a low of $1,077 on Friday, its lowest since early 2010, in a fifth week of losses.

“Gold is treading water despite a slight improvement in the dollar and U.S. Treasury yields,” Mitsubishi analyst Jonathan Butler said.

“That would seem to indicate some pricing in of the Fed pushing out interest rate rises further into the future.”

Rising interest rates pressure gold by lifting the opportunity cost of holding bullion, while boosting the dollar, in which it is priced.

via Reuters

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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