Gold price holds tight range as investors await Fed verdict

September 18, 2019

London (Sept 18) - Gold consolidated around the $1,500 level on Wednesday, keeping to a $3 range ahead of a U.S. Federal Reserve decision on monetary policy, while fears of oil-led inflation ebbed, limiting safe-haven inflows into bullion.

Spot gold was steady at $1,501.34 per ounce by 1032 GMT. U.S. gold futures dipped 0.2% to $1,510 per ounce.

"Hopes that Saudi Arabia's production is going to come back online and oil prices will start to depreciate have boosted market sentiment, so we continue to see some calm across the markets ahead of the Fed meeting," said FXTM analyst Lukman Otunuga.

Oil prices retraced, having surged nearly 15% earlier in the week, after Saudi Arabia's energy minister said the country would restore its lost production by the month-end having recovered supplies to customers to levels they were prior to attacks on its key facilities.

Gold is considered a hedge against oil-led inflation.

"Gold failed to capitalize on the news over the weekend (Saudi plants attacks); there is something about that $1,500 level and gold is waiting for a catalyst, which will come in the form of the Fed," Otunuga added.

The Fed will conclude its latest policy meeting on Wednesday buffeted by conflicting economic data and under steady pressure from the White House for steep interest rate cuts.

Investors are largely pricing in a quarter-point rate cut, and the focus will be on how much more easing the Fed signals for this year and next.

Focus is also on the Bank of Japan's policy meeting due on Thursday. The central bank is expected to ease its policy this year.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The dollar, meanwhile, rose against a basket of major currencies.

"The latest price rise (in gold) was very quick and was driven to a large extent by speculation," Commerzbank analysts said in a note.

"It is therefore likely to take some time for the gold price to settle down in any lasting manner above the psychologically important $1,500 per troy ounce mark. However, we believe that the price-supportive factors should gain the upper hand in the longer term."

Among other precious metals, silver slipped 1% to $17.84 an ounce, while platinum dropped 0.8% to $935.63.

Palladium eased 0.2% to $1,595.97 per ounce.


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