Gold consolidates, dovish Fed remarks support prices

Gold was consolidating on Tuesday morning in London, supported by dovish comments from Federal Reserve governor Lael Brainard last night.

– The spot gold price was last at $1,328.25/1,328.60 per ounce, little changed from Monday’s close. Trade has ranged from $1,328.00 to $1,332.15 so far. Gold hit a one-week low of $1,320.55 on Monday on initial expectations that Brainard’s comments could prove hawkish, as other Fed speakers have been recently.

– But expectations of a September rate increase diminished after Brainard warned it would be a mistake to raise interest rates too quickly, calling instead for “prudence in the removal of policy accommodation”. Subsequently, the CME Group FedWatch tool put the odds of a September rate increase at just 15 percent, down from 24 percent earlier in the day.

– “While we believe that gold should have benefited a little more from recent developments, and we look for further modest declines, we think any such downside will be limited,” HSBC analyst James Steel noted. “As the market reduces the likelihood of a near-term rate rise and if oil losses stabilise, gold prices should find a bottom, at least in the run-up to the FOMC.”

– The Fed is now in media lockdown mode into the Fed meeting on September 21, which “could give gold a chance to stabilise”, Steel noted.

– In the other precious metals, silver was little changed at $19.100/19.120 per ounce. Platinum at $1,053/1,059 was up $5 and palladium gained $4 to $659/667.

(Editing by Mark Shaw)

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