Gold treads water amid wait for central bank meetings

The spot gold price treaded water during Asian trading hours on Tuesday, November 1, as market participants waited for central bank meetings in the US and Japan.

Spot gold was recently trading at $1,276.85-1,277.15 per ounce, up $0.95 from Monday’s close. Trading ranged at $1,275.55-1,277.95 so far on Tuesday.

On Wednesday, industry watchers will focus on the conclusion of the Federal Reserve’s monetary policy two-day meeting.

Solid manufacturing figures from the US, Europe and Asia has boosted investor sentiments and expectations of a US rate hike this year, though most expect the US policy-makers to keep the Federal Fund rate unchanged in the upcoming meeting ahead of US presidential elections.

The market current sees only a 6% chance of a rate hike in November, but a 78% chance of an increase in December, according to the CME FedWatch tool.

“Although the Fed is likely to lift rates in December, we think that the expected path of Fed funds rate will continue to flatten, which should exert downward pressure on the dollar and US real rates, boosting investment demand. Physical buying [of gold] in Asia should also pick up in the final months of the year,” Boris Mikanikrezai, an analyst at Metal Bulletin, said.

The Bank of Japan will also announce its monetary policy later today, though market participants do not expect any rate changes.

In data, China’s official manufacturing PMI for October came in at 51.2, according to statistics announced by the National Bureau of Statistics (NBS) on Tuesday. The figure was better than market forecast of 50.4 and September’s reading of also 50.4. An above 50 reading signifies expansion, and below, contraction.

The Caixin manufacturing PMI for October came in at 51.2 – above expectations of 50.2 and September’s reading of 50.1 – marking the fastest growth seen in the sector in two years.

“The economy seems to be stabilising for the moment, owing primarily to policies implemented to sustain growth. Supportive policies must be continued, or industrial output may be dragged down by a slowdown in investment,” Zhong Zhengsheng, Director of Macroeconomic Analysis at CEBM Group said.

The official PMI is more focused on large state-owned firms, while the independently surveyed Caixin PMI is closely watched for conditions among the country’s private sector.

Meanwhile, the country’s official non-manufacturing PMI, which represents the services sector was at 54.0 in October, up from September’s figure of 53.7.

Key US economic data due later today includes final manufacturing PMI, ISM manufacturing PMI, construction spending, IBD/TIPP economic optimism, and ISM manufacturing prices.

In US data released Monday, the core PCE price index month-over-month in October was in line with forecasts at 0.1%. Personal spending and income over the same period also met consensus at 0.5% and 0.3% respectively.

The Chicago PMI in October, however, disappointed at 50.6, which was below expectations of 54.1.

In other commodities, the Brent crude oil spot price fell 0.01% to $48.80 per barrel, and the Texas light sweet crude oil spot price slipped 0.06% to $46.88 so far on Tuesday.

In currencies, the US dollar index slipped 0.01% to 98.41 recently.

In equities, the Shanghai Composite increased 0.28% to 3,109.19 so far on Tuesday.

In other precious metals, silver was last at $17.905/17.925, up $0.055. Platinum rose $5 to $978/984, and palladium increased $4.50 to $619/626 so far on Tuesday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 279.85 yuan per gram, and the December silver was flat at 4,081 yuan per kilogram.

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