KEY POINTS
- Gold prices fluctuated amid uncertainty over Fed rate cuts.
- Central bank purchases and geopolitical tensions support gold demand.
- ETFs and money managers have reduced gold holdings recently.
As traders evaluated the increasing uncertainty surrounding the Federal Reserve’s impending interest rate decision, gold prices moved around on Monday.
Before marginally declining, the price of bullion increased by as much as 0.4 percent to $2,666.89, approaching the record high set last month. According to Mining.com, the precious metals market is now more volatile due to recent lowered expectations for a rate drop in November.
Since gold, a non-yielding asset, is more appealing in low-yield situations, lower interest rates usually increase demand for it. Gold prices have risen more than 25 percent this year despite the setback, driven by earlier anticipation about possible Fed rate cuts.
Central bank purchases and geopolitical tensions offer support
Expectations for monetary policy as well as a rise in central bank purchases have supported the gold gain. The demand for the metal as a safe-haven asset has been further bolstered by unrest in geopolitical hotspots like the Middle East and Ukraine.
Later in the day, Governor Christopher Waller and other Fed officials are expected to make remarks. Their remarks may influence market expectations before to the November meeting by offering more information about the Fed’s anticipated policy position.
But there are indications that sentiment is changing. According to Commodity Futures Trading Commission statistics, money managers have reduced their net-long gold holdings to an eight-week low. Exchange-traded funds (ETFs) also decreased their holdings during the previous session, indicating that investors were becoming cautious.
Gold trends alongside other metals as dollar strengthens
Spot gold fell 0.3 percent to $2,649.10 an ounce at the London closing. Gold and other dollar-priced commodities were under more pressure as the Bloomberg Dollar Spot Index increased slightly.
Silver and palladium saw losses, while platinum saw gains, and other metals saw mixed movements.
As speculators anticipate Fed indications regarding whether interest rates will remain unchanged or decrease, the next few weeks will be crucial for the direction of gold.
Market players continue to exercise caution as they weigh new changes in rate policy against persistent geopolitical threats.
