Gold futures settled higher on Tuesday for a fourth consecutive session, at their highest settlement in more than two weeks, as traders awaited this week’s Federal Reserve decision for clues on interest rates.
Price action
-
Gold for December delivery
GC00,
+0.27% GCZ23,
+0.27%
climbed by 30 cents, or less than 0.1%, to settle at $1,953.70 an ounce on Comex. After a 0.4% rise on Monday, the contract marked another settlement at its highest since Sept. 1, FactSet data show. -
December silver
SIZ23,
+0.56%
fell 4 cents, or 0.2%, at $23.46 an ounce. -
December copper
HGZ23,
-0.05%
settled at $3.75 a pound, down nearly 0.9%. -
October platinum
PLV23,
+0.93%
rose 1.1% to $948.40 an ounce, while December palladium
PAZ23,
-0.98%
ended at $1,266.50 an ounce, up 1.8%.
Market drivers
Gold has largely traded sideways since spring and is off around 0.5% so far in September. It’s seen pressure as Treasury yields advanced and the U.S. dollar strengthened. Higher yields raise the opportunity cost of holding nonyielding assets like gold, while a stronger dollar makes commodities more expensive to users of other currencies.
“For the opportunity cost of holding gold to fall, bond yields will need to go down and fast,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in market commentary. “Otherwise, there is a good chance the precious metal will start to head lower again from around these levels.”
Investors are “wary of the dollar, which remains strong, albeit off its best levels,” he said.
Razaqzada pointed out that the benchmark U.S. 10-year bond yields broke out briefly on Monday to hit levels not seen since 2007, before easing lower. “The Fed’s rate decision on Wednesday, and that of several other central banks this week, could cause global bond yields to move sharply. That, in turn, could determine the direction of gold prices,” he said.
The Fed is expected to leave its policy interest rates unchanged Wednesday when it concludes a two-day policy meeting, but investors will be looking for clues as to whether a rate increase may be in store in the future.
See: 4 things to watch for at this week’s Fed monetary-policy meeting
“The question now for gold traders is whether the Fed is willing to acknowledge that it’s probably done with rate hikes, as we heard from the ECB last week, or continue to insist another is likely,” said Craig Erlam, senior market analyst at Oanda, in a note.
“The dot plot will be key to this but as always, traders will hang on Powell’s every word. A hawkish tone from the Fed could put $1,900 in jeopardy,” he wrote. The dot plot is the graph of interest-rate projections from individual Fed policy makers.
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