Gold Prices Tread Water Ahead of Federal Reserve Meeting
Gold is slightly lower on the London spot market
Gold prices were slightly lower on the London spot market Wednesday, moving between gains and losses as the market remained cautious over a potential rate rise in the U.S.
Spot gold was trading down 0.02% at $1,121.27 a troy ounce in morning European trade, hovering near two-week lows.
The next U.S. interest rate rise isn’t now expected until December at the earliest, rather than at the Federal Reserve’s meeting next week. Gold prices will tread water until that meeting, analysts believe.
“In the run-up to the Fed’s meeting next week, market participants are likely to be exercising restraint, so we are unlikely to see any pronounced price fluctuations in one direction or another,” said Commerzbank in a note.
Gold has a better time competing with interest-yielding assets, like Treasurys, when rates are pinned near zero. Additionally, a rate rise would likely strengthen greenback. This would be bad news in terms of demand for the dollar-denominated metal.
Analysts believe that gold will see some short-term support as investors use it as haven against market volatility and amid potentially greater seasonal demand from India ahead of the religious festival Diwali.
“We are long-term still bearish on gold, but current market conditions may suggest that gold bulls are in control of the market in the near term,” Howie Lee, an investment analyst at Phillip Futures, said in a note.
The World Platinum Investment Council, meanwhile, said on Tuesday global demand for platinum rose by 15,000 ounces to 2.04 million ounces in the second quarter. The WPIC’s full-year forecast sees consumption outstripping supply by 445,000 ounces on the back of greater investment demand, compared with a forecast of 190,000 ounces in the first quarter.
Some analysts saw the data as bearish for the market, which has struggled with an increase in supply from South Africa after the end of strikes, weakening jewelry demand from China and patchy automotive sales data.
“What surprised us about the figures from the WPIC was that it appears the platinum industry has still not got the message that production has to reduce–and still appears to be clinging to the hope of a price recovery,” said Investec in a note.
Spot platinum was up 0.2% at $1,003.28 an ounce.
Among the other precious metals, spot silver was down 0.1% at $14.760 an ounce and spot palladium was down 0.02% at $585.86 an ounce.
Source: WSJ – Gold Prices Tread Water Ahead of Federal Reserve Meeting
