Gold stages modest recovery, markets quiet

Gold futures were on pace to finish in positive territory Monday in the US, although trade was quiet with investors preferring the sidelines until a clearer US monetary picture emerges.

Gold for December settlement on the Comex division of the New York Mercantile Exchange gained $7.20 or 0.6 percent to $1,317.40. Late last week, the precious metal dropped to the lowest price since August 31.

Starting tomorrow, the Federal Open Market Committee (FOMC) begins its two-day meeting to decide whether the US economy can sustain a rate hike despite weeks of mixed data. 

The Fed is overwhelmingly expected to hold off on another rate until 2017 but in the past couple of weeks various members of its policy board have presented a hawkish outlook for the US economy into the rest of the year.

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

“While no surprises from the Fed meeting are likely given the latest rather weak US data, the market will doubtless be looking towards Tokyo with bated breath, where the comprehensive assessment of monetary policy that was announced by BoJ Governor Kuroda will be presented on Wednesday,” Commerzbank said in a note.

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.”

In a light data day, US NAHB housing market index in September came in at 65, above the forecast of 60.

Meanwhile in American equities, the Dow Jones industrial average and S&P were up 0.1 percent and 0.5 percent respectively, while the dollar softened 0.2 percent to $1.1179 against the euro.

As for other precious metals, Comex silver for December delivery surged 42.3 cents or 2.2 percent to $19.285 per ounce. Trade has ranged from $18.840 to $19.380.

Platinum for October settlement rose $6.40 or 0.6 percent to $1,024.00 per ounce, while the most actively traded palladium contract stood at $685.70 per ounce, up $13.30.

(Editing by Tom Jennemann)

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