Uncertainty around Fed’s 2019 supports gold

Bengaluru — Gold prices were steady on Friday supported by the uncertainty around the Federal Reserve’s policy outlook for 2019 but the metal was on track to mark its biggest weekly decline in five weeks, as a firmer dollar weighed on the sentiment.

Spot gold was steady at $1,241.99/oz, as of 3.55am GMT. On Thursday, prices fell to their lowest level since December 7 at $1,239.83.

The metal is down about 0.4% so far for the week.

US gold futures were down 0.1% at $1,246/oz.

There are not many immediate risks at this point of time, therefore some people are holding on to their positions in gold and not liquidating, said Brian Lan, MD at dealer GoldSilver Central in Singapore.

“Dollar has also strengthened a little.… We don’t expect gold to do much unless there’s something on the Fed decision [on rate hikes].”

The dollar index, which measures the greenback against a basket of six major currencies, was up about 0.1% as investor focus shifted to an expected US interest rate hike next week.

“Market sentiment towards zero-yielding gold is at risk of souring ahead of the Fed meeting next week where interest rates are expected to be hiked. However, with the Fed potentially taking a pause on rate hikes next year, gold remains somewhat supported,” said Lukman Otunuga, a research analyst at FXTM.

The risk of a US recession in the next two years has risen to 40%, according to a Reuters poll of economists who also found a significant shift in expectations toward fewer Fed interest rate rises in 2019.

Lower interest rates reduce the opportunity cost of holding bullion and weigh on the dollar.

“The near-term outlook for gold hangs on the dollar performance.… Bulls remain safe above the $1,240 support level with $1,250.60 acting as a level of interest,” Otunuga added.