· Gold prices steadied on Monday, after a sharp fall in the previous session, as investors waited for the U.S. Federal Reserve’s decision on interest rates at its month-end meeting next week.
· Spot gold was up 0.1% at $1,426.44 per ounce as of 1:44 p.m. EDT (1744 GMT). The metal touched its highest since May 2013 at $1,452.60 on Friday, but closed about 1.5% lower.
U.S. gold futures settled mostly unchanged at $1,426.90.
· “Gold, for most parts, is steady as we are on hold until we get to the Fed meeting. A lot of the move up (in the last week) formed a consolidation pattern,” Edward Moya, a senior market analyst at OANDA said.
“Most people feel there is going to be a 25-basis-point cut, but there is a growing camp that believes we could see a net 50-basis-point cut, which means uncertainty is high and it is going to be difficult to see gold break out until past that event.”
· Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar.
· The Fed is expected to announce its decision at its July 30-31 meeting. Markets also expect a dovish policy stance from the European Central Bank when it meets on Thursday.
The likelihood of a 50-basis-point cut soared last week after dovish comments by Fed policymakers. Those expectations later dwindled after an official clarified that the remarks did not refer to potential policy actions.
· U.S. rates futures implied traders positioned for a 72% chance the Fed may lower its rate by a quarter point at its July policy meeting, according to CME Group’s FedWatch tool.
· Political tensions in the Middle East were also offering underlying support for bullion, a safe-haven asset, analysts said.
· Britain was weighing its next moves in a Gulf tanker crisis on Sunday, with few good options apparent as a recording emerged showing that the Iranian military defied a British warship when it boarded and seized a ship three days ago.
· Reflective of sentiment in gold, holdings of SPDR Gold Trust , the world’s largest gold-backed exchange-traded fund, rose 0.7 percent to 820.49 tonnes on Friday.
· Speculators raised their bullish stance in gold and silver in the week to July 16.
· Silver rose 1.1% to $16.39 an ounce, after touching its highest level in more than a year in the previous session.
· “After rising from below $15 to over $16.50 in just two and a half weeks, we would not be surprised if some market participants were to take profits, thereby prompting a price correction,” Commerzbank analysts said in a note.
· Platinum rose 0.7% to $849.28 and palladium rose 1.4% to $1,526.50.
Reference: Reuters
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