Gold price locked in tight range near 3-month low, awaiting Fed, BOJ direction
London (Sept 20) Gold futures prices on Tuesday clung to narrow ranges near the three-month lows notched late last week, as focus remained fixed on the dollar’s next move following Federal Reserve and Bank of Japan policy meetings due to wrap up on Wednesday.
December gold GCZ6, +0.00% was up a slim 60 cents, or less than 0.1%, to $1,318.40 an ounce; it spent time above and below the previous session’s close in early action. Gold logged a 1.8% weekly loss last week.
The ICE U.S. dollar index DXY, +0.02% a measure of the greenback against six currencies, was down 0.1%. U.S. stocks were expected to open modestly higher.
While near-term decision-making from the Fed and the Bank of Japan remains up in the air, their anticipated split paths for policy — the BoJ is in easing mode, while the Fed looks to eventually unwind its low interest-rate policy — continue to tug on their country’s respective currencies. That leaves financial markets hungry for signals from this week’s meetings.
Higher U.S. rates, or lower Japanese rates, are seen as dollar-supportive. That could undermine pricing for gold priced in greenbacks.
“The U.S. central bank is not expected to issue a rate hike this time around but hawkish guidance in the press conference, policy statement and economic forecasts released following the outing may set the stage for tightening in December,” said Ilya Spivak, currency strategist at Daily FX, in a note. “This may boost the U.S. dollar.”
As for the Bank of Japan, “a comprehensive review of the central bank’s various stimulus efforts is set to be published alongside the policy announcement, shining a light on rumored deep divisions among BOJ members about how best to proceed,” Spivak added. “Signs of turmoil, coupled with emphasis on negative rates versus asset purchases may lead the yen higher.
A rising-rate climate can also dull the appeal of nonyielding gold. But the Fed picture isn’t that clear-cut. Signs of accelerating U.S. inflation could prompt the Fed to move to raise rates more aggressively, and sooner versus later. Any perception that the U.S. central bank is behind the curve in keeping suddenly rising inflation contained could ultimately lift demand for gold as a hedge against inflation’s erosive effects on other assets.
“The bullishness from last June [in gold] has noticeably waned somewhat, but we think this is more a reflection of near-term rather than longer-term views,” said UBS strategist Joni Teves, in a note. “We believe the rationale for holding gold within a portfolio amid an environment of depressed yields, sluggish global growth and heightened macro uncertainty remains intact, and our conversations with investors have not provided indications that this view has changed.”
Meanwhile, December silver SIZ6, -0.29% slipped 1 cent, or 0.1%, to $19.29 an ounce after mild gains on Monday. It shed around 2.6% last week.
The SPDR Gold Trust GLD, +0.21% was up 0.1% premarket, while the iShares Silver Trust SLV, +1.90% rose 0.1%. The VanEck Vectors Gold Miners ETF GDX, +0.34% slipped 0.1%.