Gold prices moved higher Monday, sticking to a tight trading range ahead of the U.S. Federal Reserve’s gathering this week, which could solidify bullish or bearish momentum for the precious metals complex.
Gold is seeing some support but remains below $1,800 and “within the range it’s traded broadly within over the last few weeks,” said Crai Erlam, senior market analyst at Oanda.
“If it can break above $1,810, it may pick up some momentum to the upside but I struggle to see that ahead of the Fed decision on Wednesday,” he said in a market update. “Then it’s a question of what gold bulls will want to see from the meeting. No taper acceleration? Pushback against rate hikes? Transitory being brought out of retirement? I’m not sure we’ll see any of these.”
February gold
GCG22,
GC00,
traded $2.80, or 0.2%, higher at $1,787.60 an ounce on Comex, after the most-active contract booked gains of less than 0.1% for the week on Friday.
Meanwhile, March silver
SIH22,
SI00,
was trading 15 cents, or 0.7%, higher at $22.345 an ounce, following a weekly drop around 1.3%.
Market participants are awaiting monetary-policy decisions from the Fed when its two-day policy meeting concludes Wednesday, where the central bank will offer its update on projections of interest rates and the pace of its reduction of COVID-era accommodations, which will impact trading in precious metals such as gold and silver. Updates on policy from the Bank of England, European Central Bank and Bank of Japan also are on deck later in the week.
The central-bank meetings scheduled to be held this week are likely to be big drivers for the precious metal, with “the Fed expected to tighten its monetary policy, which will likely mean that the American central bank will hike its policy rate sooner than initially expected as well,” said Naeem Aslam, chief market analyst at AvaTrade. “Thus, because gold is a non-interest-bearing asset, the opportunity cost of holding the precious metal will rise, making it less attractive to investors.”
On Friday, gold turned higher after the U.S. government reported that the rate of consumer inflation hit the highest level in nearly 40 years. Data on Friday revealed that the U.S. cost of living climbed in November and drove the rate of inflation to 6.8%, marking the highest annual rate since 1982.
The rise in inflation supported gold prices on Friday as “the yellow metal is considered to be a safe haven commodity, which investors use to hedge against inflation in times of uncertainty,” Aslam said in a Monday note.
Also on Comex, March copper
HGH22,
shed 0.1% to $4.282 a pound. January platinum
PLF22,
lost 0.8% to $926.70 an ounce and March palladium
PAH22,
traded at $1,732 an ounce, down 1%.
