Gold boosted as US dollar retreats ahead of key central bank meetings

The spot gold price rose during Asian trading hours on Monday as the US dollar retreated ahead of the US Federal Open Market Committee (FOMC) and Bank of Japan (BoJ) meetings this week.

Spot gold was last at $1,316.15-1,315.55 per ounce, up $6.35 from Friday’s close. Trading ranged at $1,309.45-1,317.10 so far.

After rising to a two-week high of 96.11 on Friday, the US dollar index slipped 0.18 percent to 95.87 so far on Monday.

“The [precious] metals are likely to trade heavily leading into the FOMC meeting this week and may see whippy price action around Wednesday’s BoJ announcement,” MKS Group said on Monday morning.

The broker sees support for gold around $1,300-1,305, and resistance around $1,325-1,330 – this level is however unlikely to be tested before the FOMC meeting.

The US Federal Reserve two-day meeting will conclude on Wednesday. Majority of market participants still do not see a Fed rate hike happening in September though the probability of this taking place in December have increased after better-than-expected inflation data last Friday.

“This might just mean we get a bigger relief rally in the face of the ‘no change’ that we and most of the market expects [on] Wednesday night. A rise in rate would be a major market shock,” National Australia Bank said on Monday morning.

The Fed funds futures market has assigned implied probabilities of September and December rate hikes at 12 percent and 54.4 percent respectively on Friday, according to the CME Group Fedwatch tool. A day ago, majority had expected a rate hike to happen only next year.

US CPI month-over-month in August exceeded expectations at a 0.2 percent uptick, 0.1 percent was called for. Core CPI – excluding food and energy costs – also bested the forecast with a 0.3 percent gain, while only a 0.2 percent increase was projected.

“We see the CPI figures as not being enough for a September Fed hike, but leaving a December hike odds-on and bolstering the case for drawing some battle lines, shifting the market away from liquidity-driven support to the economic fundamentals. That’s an environment where volatility will remain elevated,” ANZ Research said on Monday morning.

On Wednesday, the Bank of Japan will hold its monetary policy. The market is expecting easing measures but there remains uncertainty over the measures it will take.

Some market observers also noted support for the safe haven asset following a bomb blast in New York on Saturday night.

An explosion at the crowded Chelsea neighbourhood in Manhattan at around 830pm local time had injured 29, and while no one has claimed responsibility, New York governor Andrew Cuomo has called it “an act of terrorism”.

In a separate incident, a man was shot dead by police after he stabbed nine people at a Minnesota shopping mall on Saturday.

The incidents have raised concerns of terrorism just two months before the US presidential election and as world leaders meet in New York City for the 71st session of the UN General Assembly.

It is a quiet day for data with mainly the German Buba monthly report and US NAHB housing market index due later today.

In other commodities, the Brent crude oil spot price rose 1.26 percent to $46.56 per barrel, and the Texas light sweet crude oil increased 1.62 percent to $43.87 recently on Monday.

In equities, the Shanghai Composite gained 0.48 percent to 3,017.25 so far on Monday.

In other precious metals, silver was last at $19.11/19.14, up $0.36. Platinum rose $14.50 to $1,026/1,033, while palladium gained $11 to $678/684 recently on Monday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 285.15 yuan per gram, and the December silver was flat at 4,251 yuan per kilogram.

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