Copper, gold trade stagnant as Fed meeting commences

Base and precious markets were little changed on Tuesday morning in the US ahead of major monetary decisions from the US and Japan.

Gold for December settlement on the Comex division of the New York Mercantile Exchange ticked down 70 cents or 0.1 percent to $1,317.10 per ounce. Trade has ranged from $1,315.90 to $1,321.10 so far.

Comex copper for December delivery was unchanged at $2.1565 per pound. The contract is still hovering around a one-month high.

Although sentiment has picked up in the base and precious metals while the dollar has weakened, market participants are holding fire “ahead of key policy review and statements out of Japan and US tomorrow [and] potential readjustments to macro landscape”, a trader said.

The Federal Open Market Committee’s (FOMC) two-day meeting starts today; policymakers are deciding whether the economy can sustain higher interest rates after weeks of mixed data.

While most market participants – only around 15 percent, according to the CME Group FedWatch tool, compared with 12 percent last Friday – still do not anticipate the Fed raising rates in September, 60.1 percent now see a move in December.

In Japan, the BoJ is expected to announce on Wednesday another round of stimulus to prop up the weak domestic economy. Although the Japanese central bank introduced negative interest rates earlier this year, these has failed to ignite inflation or reverse nearly three decades of little to no growth.

“While markets are pricing a no Fed rate hike, the BoJ is almost certainly condemned to surprise markets,” Swissquote said.”At this point of the game, there is no clear solution for the central bank, which currently sees the yen strengthening no matter what it does. As a result, there is a decent likelihood that rates will go even deeper into negative territory and that policymakers will increase their QE asset purchases.

“However, an albeit unlikely surprise from the Fed could have the potential to totally change the game for the BoJ, which could remain on hold thanks to an unexpected increase in dollar demand,” it added.

In US data, building permits in August at 1.14 million were below the forecast of 1.17 million. Housing starts over the same period also came in at 1.14 million, again missing the predicted 1.19 million.

In European markets, Germany’s DAX and France’s CAC-40 were up 0.8 percent and 0.4 percent respectively while the dollar was unchanged at 1.1177 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex declined 55 cents or 1.3 percent to $43.31 per barrel while the most active Comex silver contract at $19.250 per ounce was down four cents.

(Additional reporting by Ewa Manthey, editing by Mark Shaw)

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