Gold prices rose on Monday as the dollar slipped but gains were capped by jitters ahead of a Federal Reserve monetary policy meeting and a rise in U.S. government bond yields.
Gold and silver prices ended the U.S. day session higher in Monday, with silver posting solid gains. Short covering in the futures markets and perceived bargain hunting in the cash markets were featured, after recent selling pressure. December Comex gold was last up $7.10 an ounce at $1,317.20. December Comex silver was last up $0.438 at $19.305 an ounce.
The key “outside markets” were also in a daily bullish posture for the precious metals Monday, as the U.S. dollar index was lower and crude oil prices were higher. However, the greenback bulls still have some upside technical momentum and the crude oil bears still have the overall near-term technical advantage, which could work against the metals markets as the week progresses.
Traders and investors worldwide are growing somewhat more confident this week’s meeting of the Federal Reserve’s Open Market Committee (FOMC) will not produce an interest rate increase, and that is also friendly for the precious metals bulls. The FOMC meeting begins Tuesday morning and ends Wednesday afternoon. The more likely date of any U.S. rate hike would be in December, according to the marketplace.
Possibly just as market-sensitive as the FOMC meeting, the Bank of Japan also meets this week to discuss its monetary policy. Unlike the FOMC meeting, there is not a clear consensus on what the BOJ will do on monetary policy: stand pat or initiate still more stimulus. The uncertainty ahead of the BOJ meeting could make its outcome a bigger markets event than the FOMC meeting. The BOJ meeting results should be out sometime early Wednesday.
There is a risk of stop-loss selling if spot gold falls through the $1,300-an-ounce level, says Mitsubishi. Stops are pre-placed orders activated when certain chart points are hit. “For now, immediate technical support for gold lies at $1,306, the 100-day moving average, which is roughly coincident with the 38.2% Fibonacci retracement of the May low to July high at $1,308,” Mitsubishi says. “Gold is vulnerable to stop-loss selling should it breach the $1,300 level, which has held since early June – if this level does break, then this potentially opens up a range down to $1,288 (50% retracement of May-to-July move). The overall medium term macroeconomic backdrop should remain supportive to gold after this week’s Fed and BOJ (Bank of Japan) policy meetings, though a range of possible outcomes will make for heightened volatility immediately before and after the announcements.”
Exchange-traded-fund buying of gold while prices for the metal fell Friday shows that investors still view dips as buying opportunities, says Commerzbank. Global gold ETFs collectively posted an inflow of more than 10 tonnes on Friday, Commerzbank points out. Meanwhile, Comex December gold on Friday hit a two-week low of $1,309.20 an ounce. “It would appear that ETF investors are viewing the price slide as a good opportunity to buy,” Commerzbank says. “Perhaps gold is seen less as a jewelry metal or safe haven at present and more as a store of value in view of the still ultra-expansionary monetary policy pursued by the world’s central banks, the downsides of which more and more investors are coming to realize.”
Reference: KITCO, Reuters
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