Gold rose back above $1,170 an ounce on Wednesday on caution ahead of the Federal Reserve’s latest policy statement, though gains were capped by uncertainty over the timing of an expected US interest rate rise.
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LONDON-Gold prices were higher on the London spot market Thursday, as bargains hunters bought the metal on the belief that a USA rate rise is now priced into this market.
The FOMC statement stated that “Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace”.
As for the other metals, silver was little changed at $15.97/16.02 per ounce. Trade has ranged from $1,165.40 to $1,173.10 so far. “If gold can not push convincingly higher soon, recent longs may become disenchanted and liquidate”.
Gold doesn’t offer interest, so the metal finds it hard to compete with assets that do, like Treasurys, when interest rates rise.
The funds’ hopes were dashed when the Fed on Wednesday signaled less concern that deteriorating global economies will be a drag on US growth and said they’ll consider tightening monetary policy at their next meeting in December, while stopping short of making a commitment to act this year.
Traders see a 48 percent chance the USA central bank will raise its benchmark rate from near zero at its next meeting, futures data compiled by Bloomberg show. It was the biggest intraday advance on record. Gold is often seen as a hedge against inflation. “As a safe haven, there’s a waning need”.
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“Needless to say, investors remain somewhat confused about the Fed’s basic policy message at this stage of the game, as expectations have been shifting wildly over the past few weeks”, INTL FCStone analyst Edward Meir said. “And as a commodity, gold is relatively expensive”.
