Gold edges higher as market participants brace for next week's Fed meeting
Gold futures traded modestly higher Tuesday as investors looked ahead to the Federal Reserves’s policy meeting next week, which could determine the direction of the dollar and dollar-denominated commodities like gold.
Gold for December delivery was marginally higher, gaining $1, or about 0.1%, at $1,122.10 an ounce, after swinging between small gains and losses in early Tuesday action.
The precious metal has been in the negative territory nine of that past 11 sessions and
hasn’t drawn much of a bid in recent weeks on the expectation that the
Fed may raise interest rates for the first time since 2006.
Interest-bearing assets like Treasurys have lowered the appeal of gold, which doesn’t bear any interest, while anticipation of a near-term rate increase has dulled expectations for gold.
Elsewhere in the metal trading, December silver rose 19 cents, or 1.3%, to trade at $14.74 an ounce. High-grade December copper was up 9 cents, or 3.7%, at $2.398.
Lukman Otunuga, research analyst at FXTM, said in a Tuesday note that the global decline of commodities and stable appreciation of the greenback continues to add pressure on the yellow metal.
"If data from the United States this week is robust, then more pressure may be experienced for gold which may trigger a selloff to the next relevant support at $1,110," he said.
On Friday, the contract lost $3.10 after the monthly U.S. nonfarm payrolls report offered a mixed picture of the health of the country’s labor market. The report showed just 173,000 jobs were added to the economy in August, but unemployment, at 5.1%, hit its lowest level since 2008.
"The major catalyst for a potential heavy selloff in gold continues revolve around whether the Federal Reserve begins to raise US interest rates this year," Otunuga said.
Demand from Asian consumers has helped support the yellow metal somewhat with recent data showing that China bought 16 tons of the yellow metal in August, after purchasing 19 tons in July.
