Gold prices soften amid market uncertainty

London (Sept 21)  Gold prices were slightly lower on the London spot market on Monday, moving between losses and gains after last week's decision by the Federal Reserve to keep US rates on hold continued to fuel market uncertainty.

Spot gold was down 0.02 per cent at $US1,138.72 a troy ounce in morning European trade, as it traded within a tight $US3 range.

Late last Thursday, the Federal Open Market Committee said it was leaving interest rates unchanged. This boosted gold, which competes more easily with interest-yielding assets when rates are kept near zero.

A likely rate increase has capped the metal's gains for several months. And with little in the way of a new source of demand, analysts expect expectations of rate increases to continue to dictate trade in gold.

"Over the weekend, various Fed members intimated that they would like to see a rate rise this year and this should keep a lid on any gold rally for the moment," said David Govett at Marex Spectron, in a note.

Gold is also being moved by the dollar, a currency which, in turn, is being influenced by the Fed. On Monday, the dollar weakened against a basket of currencies, including the euro, sterling, the yen and the yuan. This added support for gold, which is priced in dollars and becomes cheaper to buy for those holding other currencies when the greenback softens.

Looking ahead, demand for the precious metal is likely to tick higher on the back of a softer dollar and a pickup in physical demand.

"The dollar weakness may provide the fuel needed to aid gold bulls to" push the metal toward the next key resistance level at $US1,145/oz, wrote Lukman Otunuga, a research analyst at FXTM.

Physical demand is expected to increase from India due to the start of a series of Hindu festivals. But purchases may be affected by a light monsoon which has hit farmers' incomes.

Among the other precious metals, spot silver was up 0.1 per cent at $US15.167 an ounce, spot platinum was up 0.1 per cent at $US979.50 an ounce and spot palladium was up 0.03 per cent at $US605.49 an ounce.

Source: Business-Spectator