Gold price pulls back higher ahead of central bank meetings

Gold futures recovered somewhat from a multi-week low on Monday morning in the US, with investors expecting more dovishness from central banks this week.

Gold for December settlement on the Comex division of the New York Mercantile Exchange gained $8.20 or 0.6 percent to $1,318.40 per ounce. Late last week, the precious metal dropped to its lowest since August 31.

After weeks of speculation and conjecture, the Federal Reserve starts its two-day meeting tomorrow and will issue a monetary statement on Wednesday afternoon.

Most market participants do not anticipate a rate rise in September although the probability of this taking place in December has increased after better-than-expected inflation data last Friday.

The Bank of Japan is also meeting this week; investors expect another round of stimulus measures to combat weak inflation and non-existent growth.

“All eyes on the Fed meeting this week but the initial catalyst will be the BOJ announcement tomorrow,” Kitco’s Peter Hug said. “It remains unlikely that the Fed moves in September but should they surprise, the market is unprepared.”

Holdings in the exchange-traded funds (ETFs) tracked by FastMarkets have risen 10.5 tonnes, suggesting that investors do not anticipate a hawkish Fed statement after weeks of mixed data.

“On balance, we expect prices to break higher before too long so we would look for buying opportunities either into strength or into a rebound if prices dip further,” William Adams at FastMarkets said. “Prices may well get more nervous ahead of Wednesday’s decisions from the Bank of Japan and the FOMC on rates and monetary policy.”

There is no data of note scheduled for today but the pace picks up later this week.

Meanwhile in European markets, Germany’s DAX and France’s CAC-40 were up 0.8 percent and 1.5 percent repectively while the dollar softened by 0.1 percent to 1.1163 against the euro.

As for other precious metals, Comex silver for December delivery surged 44.3 cents or 2.4 percent to $19.305 per ounce. Trade has ranged from $18.840 to $19.380.

Platinum for October settlement rose $8.70 or 0.9 percent to $1,026.30 per ounce while the most actively traded palladium contract at $679.65 was up $7.25.

(Editing by Mark Shaw)

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