Gold rises as US data puts dollar under pressure
New York (Oct 28) Gold prices rose on Tuesday as softer than expected US data pressured the dollar, but moves were muted ahead of a closely-watched Federal Reserve meeting starting later on Tuesday.
The Fed is tipped to announce the end of its massive bond-buying stimulus programme, known as quantitative easing (QE), at the conclusion of the two-day meeting on Wednesday.
Ahead of that, gold was lifted by a drop in the dollar, with the US unit under pressure from disappointing data on domestic home prices and durable goods orders, though it pared losses after a private gauge on US consumer confidence hit its highest in seven years.
Spot gold was up 0.4% at $1,230.05 an ounce by 2.49pm GMT, while US gold futures for December delivery were up 80 cents an ounce at $1,230.10.
While the US data helped gold vault above $1,230 an ounce, MKS’ head of trading Afshin Nabavi said he did not expect gold to break out of its current range ahead of Wednesday’s Fed announcement.
"It’s the euro and the stocks which are leading, for the time being," he said.
In addition to the end of QE, investors will be watching the Fed’s statement for signals on the timing of any interest rate increase and its view on the global economy.
The Fed is expected to reinforce its stated willingness to wait a long while before increasing interest rates after a volatile month in financial markets that saw some measures of inflation expectations drop worryingly low.
A delay in any rate rise could boost gold, a non-interest-bearing asset.
Gold has gained nearly 4% on fears of a global slowdown since dropping below $1,200 this month.
Overnight in Asia, some buying out of China lifted gold from its early lows at $1,222.20 an ounce, its weakest since October 15.
"There were some stops triggered once we breached yesterday’s low, but China walked in and pushed up gold," one Hong Kong trader said.
"People are nervous ahead of the FOMC and big position changes are unlikely. For the moment, I think we will hold between $1,220 and $1,240."
Data on Monday showed China’s net gold imports from main conduit Hong Kong jumped to a six-month high in September as the world’s biggest consumer stocked up ahead of its National Day holiday.
But imports have slowed since the holiday, traders said, suggesting that gold may lose this source of support.
Silver was up 0.8% at $17.22 an ounce. The gold-silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, eased back to 71.1 on Tuesday from last week’s five-year high of 72.7 as silver outperformed.
Investor interest in silver remains soft, however. Outflows from silver-backed exchange-traded funds have risen to 11.51-million ounces in October, the largest monthly decline since May last year, UBS said in a note.
Spot platinum was up 1.4% at $1,265.24 an ounce and spot palladium was up 1.8% at $791, having earlier hit a near three-week high at $798 an ounce.