Gold rose on Monday, after touching a two-week low in the prior session, as the dollar softened, but caution ahead of the U.S. Federal Reserve’s monetary policy decision kept a lid on prices. Spot gold was up 0.2 percent at $1,315.77 an ounce by 0638 GMT, and US gold futures rose 0.1 percent at $1,319.1 an ounce.
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“Do expect gold prices to be extremely volatile towards the meeting”. The probability of a rate increase at the December FOMC meeting is now at 59%, up from 55% on Friday.
“While no surprises from the Fed meeting are likely given the latest rather weak U.S. data, the market will doubtless be looking towards Tokyo with bated breath, where the comprehensive assessment of monetary policy that was announced by BoJ Governor Kuroda will be presented on Wednesday”, Commerzbank said in a note.
Spot gold was up 0.4 percent at $1,315.60 an ounce by 0453 GMT, not far from a low of $1,306.26 hit on Friday, the weakest since September 1.
Hedge funds have cut their bets on a bullion rally by the most in more than three months, with speculation mounting that Fed officials, in the statement scheduled for release this week, will still signal that higher United States interest rates are on the way. But higher rates would increase the opportunity cost of holding gold that yields nothing.
However, the return of Chinese investors after the Mid-Autumn Festival is expected to help bolster gold, as is strong technical support around $1,305, the 100-day moving average.
Holdings in the exchange-traded funds (ETFs) tracked by FastMarkets have risen 10.5 tonnes, suggesting that investors do not anticipate a hawkish Fed statement after weeks of mixed data. If there is any buying, it must be in arbitrage as Shanghai premiums were firm.
Gold prices rebounded on Tuesday in Asia as investors looked ahead to central bank policy reviews in Japan and the US on Wednesday. Gold is priced in dollars and becomes cheaper to foreign buyers when the USA currency weakens.
Some aggressive buying has been seen, tripping stops all the way up, said Alex Thorndike, senior precious metals dealer at MKS PAMP Group.
Elsewhere on the Comex, silver futures for December delivery gained 0.04% to $19.297 a troy ounce, while copper futures fell 0.19% to $2.151 a pound.
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The metal was up almost 2 percent in the previous session. Palladium was up 1 percent at $677.72.
