Gold rose for a third day as investors looked for a haven during the equity selloff sparked by concern of a worsening slowdown in China’s economy.
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Gold for December delivery, the most actively traded contract, fell USD1.50 or 0.1%, to settle at USD1,132.50 an ounce, on the Comex division of the New York Mercantile Exchange on Monday.
Fed Vice Chairman Stanley Fischer said in a speech at the annual central bankers’ meeting in Wyoming on Saturday that USA inflation was likely to rebound as pressure from the dollar fades, allowing the Fed to raise rates gradually. Markets will comb the ADP employment report as a rough predictor of the more comprehensive US non-farm payrolls due on Friday.
A stronger USA dollar is helping drive Australian gold production and buffeting local prospectors from the effects of a global sell-off in bullion, according to a sector survey released on Sunday.
“The biggest factor that could upset the current course of markets would be a potential change in Fed policy that weakens the dollar”, he said in this month’s edition of his Credit Strategist newsletter. That would be a 3.7 percent to 4.9 percent decline from the benchmark’s closing level of 1,972 on August 31.
Although the recent market volatility led many investors to believe the Fed will postpone its first interest rate increase in almost a decade, a hike this year is very much expected and even a September increase remains on the table. “There’s also some speculation that the Fed might delay interest rate hikes, pushing gold prices higher”.
Spot gold was up 0.5 percent at $1,139.60 an ounce by 0153 GMT, after an uneventful session on Monday.
As a result, the dollar’s index against a basket of six major currencies, which rose 1.2 percent last week as risk sentiment somewhat recovered, stepped back to 95.922 from last week’s high of 96.324. The euro dipped to $1.1216, adding to an overnight loss of 0.8 per cent.
The euro hit a two-week low against the dollar on Thursday after ECB President Mario Draghi said the bank’s bond-buying programme may run beyond September 2016 and that its size and composition may be adjusted. Sterling has strong technical support at its July low of $1.5330.
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EUR/USD gained 0.48% to trade at 1.2267. Traders have reduced bets that the Federal Reserve will raise interest rates in September.
