Gold marker ticks higher, equities selloff

Gold futures recovered from a one-week low Tuesday in the US, although prices remain confined to a narrow range with the Federal Reserve meeting less than a week away.

Gold for December settlement on the Comex division of the New York Mercantile Exchange was last up 50 cents or 0.1 percent to $1,326.10 per ounce. Trade has ranged from $1,322.30 to $1,335.90.

Investors are starting to head to the sidelines with the Federal Open Market Committee (FOMC) starting its two-day meeting on September 20. There are no scheduled talks until its statement is released on Wednesday afternoon.

“These markets are going nowhere interesting without an economic release or headline for the foreseeable future and as such, I will continue to trade the range which I talked about a couple weeks ago of $1,310-$1,350,” David Govett of Marex Spectron said.

Yesterday in Chicago, Fed governor Lael Brainard said on Monday that it would be a mistake to increase the Federal Funds rate too quickly.

This was a reversal in tone after various Fed members have stated their respective desire to lift rates in the run-up to the September FOMC meeting. Brainard’s warning reduced the odds of a September increase to just 15 percent; most investors do not anticipate another rate increase until 2017, according to the FedWatch tool.

The move also weighed on the dollar, providing relief for gold prices after the metal had declined for three consecutive sessions. The dollar index was last at 95.49.

“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.”

Overnight, Chinese August industrial production rose 6.3 percent year-on-year in August, slightly better than expectations of 6.2 percent and higher than July’s reading of 6.0 percent.

Fixed asset investment in January-August increased 8.1 percent year-on-year, beating the forecast of 7.9 percent and the same level as in January-July.

Data on the Chinese economy has been mixed over the last few weeks but the latest round shows consumers are still confident and are spending money at a healthy pace moving deeper into the second half of the year. Markets in China will be closed on Thursday and Friday for the mid-Autumn festival.

In US data, the NFIB small business index for August came in at 94.4, below the predicted 94.9.

Turning to US equities, the Dow Jones industrial average and S&P were down 1.1 percent and 1.4 percent respectively, while the dollar softened 0.1 percent to $1.1244 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex slid $1.14 or 2.5 percent to $45.15 per barrel, while the most active Comex silver contract stood at $18.975 per ounce, down 0.25 cents.

(Editing by Tom Jennemann)

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