Gold futures marked a fourth straight session decline on Monday as traders looked to comments from Federal Reserve officials for further clues on the timing of a USA interest-rate increase. US gold futures rose 0.1 percent to $1,327.40 an ounce.
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On Monday gold continued to tread water with December futures trading on the Comex market in NY exchanging hands at $1,332.50 an ounce in European trade.
A chorus of hawkish comments from Federal Reserve officials kept expectations alive for a September rate increase despite a recent spate of disappointing economic data. “It is going to create a little bit of volatility going forward”, ANZ analyst Daniel Hynes said.
Higher interest rates weigh on gold and other hard assets as the commodity pays investors nothing and struggles to compete with yield-generating assets when borrowing costs increase.
The trend was thoroughly reverse this year however with investors building large bullish positions culminating in an all-time record number of net long contracts – bets that gold will be more valuable in future – in the first week of July of 28.7 million ounces.
The change in market sentiment followed Boston Fed President Eric Rosengren’s hawkish comments on Friday, when the chances of a rate rise in September were seen at 30 per cent, up from 24 per cent before his comments. Gold bullion prices have surged nearly 20% this year as the Fed previously signaled it would slow the pace of interest rate normalization this year – higher interest rates typically weigh on gold prices since the hard asset provide no yield and would become less attractive to higher-yielding conservative debt assets in a rising rate environment.
Ahead of US Federal Reserve’s monetary policy committee meeting due on 21 September, Fed Governor Lael Brainard is scheduled to speak at the Chicago Council on Global Affairs, while Atlanta Fed President Dennis Lockhart appears before the NABE conference in Atlanta, and Minneapolis Fed President Neel Kashkari at a question-and-answer session in St. Paul, Minnesota – all on Monday.
“However, if rate concerns really rattle the financial markets, more profound equity market declines could set off renewed “safe-haven” purchases”, Steel said.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 1.12 per cent to 939.94 tonnes on Friday. The metal touched its lowest since September 2 at $18.75 per ounce.
Platinum fell 0.7 per cent to US$1,050.10 an ounce, after falling to US$1,033.45, the lowest since July 1.
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