Gold Prices Waver as Fed Decision Awaited
November 26, 2015 (Source: WSJ) — Gold prices were slightly lower on the London spot market on Thursday, as the metal fluctuated between fractional losses and gains as investors await the Federal Reserve’s decision on U.S. rates next month.
Spot gold was down just 0.03% at $1,070.78 a troy ounce in morning European trade, moving within a $5 range with dealing relatively low key as America is on holiday for Thanksgiving.
The markets have entirely eroded the gains from Turkey’s downing of a Russian jet near the Turkish-Syrian border on Tuesday—the main distraction from speculation on the Fed decision. The precious metal had a short-lived rise from some safe-haven demand after the incident.
However, the dollar was exerting some pressure on Thursday, with the WSJ Dollar Index recently up 0.16% at 90.55.
“The firm U.S. dollar, which appreciated to a 7½-month high against the euro yesterday, is weighing on the gold price,” Commerzbank AG said in a client note.
Gold is a dollar-denominated commodity and becomes more expensive for other currency-holders to buy when the greenback gains.
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Market participants are anticipating that the Federal Reserve will raise U.S. interest rates at its next meeting in mid-December, after opting to keep rates unchanged in September and October.
A rate rise would likely increase the strength of the dollar, which would be bad news for gold. Additionally, the precious metal yields no interest and finds it hard to compete with assets that do, like Treasurys, when rates are higher.
Looking ahead, analysts see a possible move higher for the metal as investors betting against prices seek to cover their positions.
“There is potential for short-covering, especially as we would have thought a rate rise must be all but fully discounted in the price by now,” said William Adams, head of research at Fastmarkets, in a note.
Most of the other precious metals were higher. Spot silver was up 0.3% at $14.218 an ounce and spot platinum was up 1.3% at $849.30 an ounce, while spot palladium was down 0.3% at $552.82 an ounce.
Raj Shah has professional experience working for over a half a dozen years at financial firms such as Merrill Lynch and First Allied Securities Inc., ... <Read more about Raj Shah>