Gold held a decline ahead of a finely balanced interest rate decision by the US Federal Reserve due later on July 29, while tensions persisted in the Middle East.
Bullion was near US$4,020 an ounce, after declining 1.1 per cent in the previous session. Interest-rate swaps imply about a one-in-three chance of a quarter-point hike by the Fed, an unusually high degree of uncertainty so close to a decision by the standards of recent years. Higher borrowing costs are typically a headwind for non-yielding gold.
Policymakers are likely to be torn between June’s tamer-than-expected inflation reading and the more recent rise in oil prices that accompanied a flare-up in fighting between the US and Iran in July.
Crude rebounded on July 29 after a three-day decline, with the US military saying it had intercepted an Iranian attack on bases in the Persian Gulf region.
The upcoming rate decision “could prove pivotal for the next leg in gold”, said Ahmad Assiri, a strategist at Pepperstone Group. “Should policymakers deliver a more-hawkish-than-expected message, reinforcing the prospect of higher rates or signalling greater concern over inflation, gold is likely to come under some pressure.”
Gold is down by nearly a quarter since the US-Iran war began more than five months ago, with high energy prices stoking inflationary pressures and raising the likelihood that interest rates will stay higher for longer.
However, the metal has managed to hold near the key support level of US$4,000 an ounce since late June, bolstered by a wave of dip-buying.
“The technical picture seems stable,” Assiri said, adding that this is “an encouraging sign, given the higher yields”.
Meanwhile, US President Donald Trump welcomed Israeli Prime Minister Benjamin Netanyahu to the White House on July 28 as he sought to lay the ground for further diplomacy. The US has paused air strikes on Iran in recent days after carrying out nearly two weeks of attacks.
Spot gold slipped 0.2 per cent to US$4,020.90 an ounce at 8.03am in Singapore. Silver was little changed at US$57.16 an ounce, having given up more than 2 per cent in the previous session. Platinum was flat, while palladium inched higher. The Bloomberg Dollar Spot Index, a gauge of the US dollar, was marginally higher after slipping 0.1 per cent on July 28. BLOOMBERG
