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Gold futures declined on Monday, posting their first loss in five sessions, as traders looked to a week that includes a report on inflation and multiple central-bank meetings where interest-rate hikes could diminish the yellow metals’ appeal to investors.
Price action
February gold
GC00,
-1.12%
GCG23,
-1.12%
fell $18.40, or 1%, to settle at $1,792.30 per ounce on Comex. That was the lowest most-active contract finish since Dec. 6, FactSet data show.
March silver
SI00,
-1.27%
SIH23,
-1.27%
shed 31 cents, or 1.3%, to $23.403 per ounce.
Palladium for March
PAH23,
-4.43%
delivery lost $84.70, or 4.3%, to $1,884.10 per ounce, while platinum for January
PLF23,
-3.03%
delivery fell $28.20, or 2.7%, to $1,008 per ounce.
March copper
HGH23,
-2.10%
fell 8 cents, or 2%, to $3.8005 per pound.
What’s happening
Gold was hit by “profit-taking ahead of the major central bank events taking place this week, with traders continuing to pay respect to the key $1,800 resistance level,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
Whether or not the yellow metal will “break and hold above this level depends pretty much on how hawkish or otherwise the [Federal Reserve] is going to be on Wednesday” when it announces its decision on interest rates, he said. If the central bank indicates that the terminal interest rate is going to be 5% or higher, this will keep bond yields underpinned, which in turn should undermine zero-yielding gold, he said.
Gold futures have rebounded over the past month as investors reacted to fears that the Fed might need to hike interest rates more aggressively early next year, raising the likelihood of a sharp economic downturn, market strategists said. An economic downturn could boost gold’s appeal as a safe-haven investment.
Gold prices on Monday softened as investors shied away from precious and industrial metals and awaited Tuesday’s consumer-price index report, along with a smattering of central bank meetings — including the Fed, the European Central Bank, the Bank of England, the Swiss National Bank and others — which are taking place this week.
When central banks impose higher interest rates, it makes gold less attractive by comparison since the yellow metal doesn’t offer a yield to investors.
For now, “there is no need to rush into any trades as this week’s events have the potential to set the directional bias for the greenback — and gold — until at least the end of the year,” said Razaqzada.
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