Gold Traders Prepare For Federal Reserve Decision

Gold is bouncing between small gains and losses in the morning session with no specific direction or support. Volumes remain low as traders prepare for the Federal Reserve meeting and rate decision on Wednesday. Gold is holding at 1075.30 well above its winter trading level. Asian markets dropped across the board on Monday, as investors remain focused on the mid-week decision from the U.S. Federal Reserve. The Japanese and South Korean exchanges were in negative territory amid the regional selloff.

The Nikkei 225 eased 461 points, or 2.4 percent, to 18,768 and the Topix was down 33 points, or 2.12 percent, at 1,516 despite a better-than-expected quarterly Tankan Survey, a broad measure of business sentiment, released by the Bank of Japan before the market open. Australian stocks lost ground on low commodity prices, with bank and resources plays firmly in the red. The main ASX 200 index was down 55 points, or 1.09 percent, at 4,974 with energy and materials sectors down 2 and 1.45 percent respectively.

Wall Street traded lower on Friday. The Dow Jones was down 309.54 points, or 1.76 percent, at 17,265. The S&P 500 was down 40 points, or 1.94 percent, at 2,012 while the Nasdaq fell 111.7 points, or 2.21 percent, to 4,933.

Gold looked set for another muted trading session on Friday but was headed for the seventh weekly drop in eight weeks as investors positioned for a looming U.S. rate hike. Silver is trading below the $14 price level showing weakness as base metal demand continues to decline. Silver is holding at 13.905 gaining 15 points in the early session. Platinum is trading at 846.75 gaining 0.65% in the Asian session. Silver saw gains as high as 0.15%

The US dollar remains supported against the majors but gains considerably against Asian currencies in today’s session as markets adjust to a risk off scenario. US dollar index is trading at 97.70, depreciating marginally against the majors on Friday but is likely to rebound going into the FED meeting this week.

Last week, gold prices declined by 1.1 percent to close at $1074.5 per ounce. Prices edged lower and was vulnerable to further weakness as the dollar rebounded ahead of a widely anticipated U.S. interest rate rise next week. Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation. Higher rates should dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year and is on track for its third year of losses.A slide in crude oil’s drop to its lowest in almost seven years as OPEC continues to pump near-record amounts of oil to defend market share – also prevented gold from reaching higher levels. Upbeat U.S. jobs data, growth and optimism in the US economy and low investment demand also acted as a negative factor.

Copper remained in the green after reversing from multiyear lows last week. Copper is trading at 2.119 up by 7 points.  Copper marched to a two-week high on Friday, with investors closing out bearish positions as the dollar weakened and following comments that the economy of top metals consumer China may be on the mend. Copper was set for a second weekly gain while battery metal lead touched its highest level in 1-1/2 months. Short covering occurred after China’s National Bureau of Statistics said the Chinese economy was showing early signs of recovery. An initial rate rise is already priced into markets and investors are looking ahead at the scope for further rate increases, which may be limited, analysts said. Base metals except Aluminium traded positive last week as dollar index weakened by around 0.8 percent providing support to the prices. While on the other hand, an announcement of production cuts by the mining companies was supportive for the base metals pack.