Gold dips on concern about upcoming Fed meeting

London — Gold dipped on Monday, pressured by a firmer dollar and the concern that the US central bank will signal a tighter future monetary policy at a meeting this week that is expected to boost rates.

Spot gold was down 0.2% at $1,295.35/oz at 9.55am GMT, while US gold futures for August delivery were 0.3% lower at $1,299.20/oz. The US Federal Reserve is likely to raise its target interest rate to above the rate of inflation for the first time in a decade this week, seeking to sustain the second-longest US expansion on record while continuing to edge rates higher.

“Everybody’s on the sidelines, waiting for the outcome of the Fed meeting. There’s a tug of war on views on what kind of message the Fed will put out,” said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.

“My personal view is that the Fed will surprise with a hawkish mode, which will see a spike in the dollar and produce a brief but deep sell-off of precious metals.”

That would open up an opportunity for investors to go long in gold since a seasonal rally was expected over the summer, Torlizzi said.

The dollar index, which measures the greenback against a basket of six major currencies, rose 0.1%.

Also weighing on gold was encouraging signs from US President Donald Trump about a summit with North Korean leader Kim Jong-un in Singapore, dimming gold’s safe-haven attraction.

Trump said Tuesday’s summit could “work out very nicely” as officials from both countries met to narrow differences on how to end a nuclear stand-off on the Korean peninsula.

“The market opened predictably quiet ahead of the abundance of risk events this week and wholly ignored President Trump going rogue at the G-7 [Group of Seven],” Stephen Innes, Asia-Pacific trading head at Oanda said.

With geopolitical risk moderating, the Fed and the ECB would guide gold’s near-term fate, he said.

Trump threw the G-7’s efforts to show a united front into disarray at the weekend.

In additional to the Fed’s decision due on Wednesday, the ECB and Bank of Japan (BoJ) also have policy meetings this week.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 0.46% to 828.76 tonnes on Friday, the lowest since February 22.

In other precious metals, silver gained 0.2% to $16.77/oz, after hitting a seven-week high of $16.93 earlier in the session.

Palladium dropped 0.4% at $1,010/oz, while platinum shed 0.3% to $899/oz. It touched a one-week high of $910.50 earlier in the session.

Reuters