Gold futures settle at a 3-week high as Fed meeting comes in focus

Gold futures settle at a 3-week high as Fed meeting comes in focus


Gold prices climbed Monday to their highest settlement in three weeks, but stuck to a tight trading range ahead of the U.S. Federal Reserve’s gathering this week, which could solidify bullish or bearish momentum for the precious metals complex.

Gold is seeing some support but remains below $1,800 and “within the range it’s traded broadly within over the last few weeks,” said Craig Erlam, senior market analyst at Oanda.

“If it can break above $1,810, it may pick up some momentum to the upside but I struggle to see that ahead of the Fed decision on Wednesday,” he said in a market update. “Then it’s a question of what gold bulls will want to see from the meeting. No taper acceleration? Pushback against rate hikes? Transitory being brought out of retirement? I’m not sure we’ll see any of these.”

February gold 
GCG22,
-0.20%

GC00,
-0.20%

rose $3.50, or 0.2%, to settle at $1,788.30 an ounce on Comex, after the most-active contract booked gains of less than 0.1% for the week on Friday. Monday’s settlement was the highest for a most-active contract since Nov. 22, FactSet data show.

Meanwhile, March silver
SIH22,
-0.66%

SI00,
-0.66%

tacked on 13 cents, or 0.6%, to end at $22.328 an ounce, following a weekly drop around 1.3%. 

Read The tale of two metals: why copper and silver have taken split paths this year

Market participants are awaiting monetary-policy decisions from the Fed when its two-day policy meeting concludes Wednesday, when the central bank will offer its update on projections for interest rates and the pace of its reduction of COVID-era accommodations, which likely will impact trading in precious metals such as gold and silver. Updates on policy from the Bank of England, European Central Bank and Bank of Japan also are on deck later in the week.

The central-bank meetings scheduled to be held this week likely will be big drivers for the precious metal, with “the Fed expected to tighten its monetary policy, which will likely mean that the American central bank will hike its policy rate sooner than initially expected as well,” said Naeem Aslam, chief market analyst at AvaTrade. “Thus, because gold is a non-interest-bearing asset, the opportunity cost of holding the precious metal will rise, making it less attractive to investors.”

On Friday, gold traded higher after the U.S. government reported that the rate of consumer inflation hit the highest level in nearly 40 years. Data on Friday revealed that the U.S. cost of living climbed in November and drove the rate of inflation to 6.8%, marking the highest annual rate since 1982.

The rise in inflation supported gold prices on Friday as “the yellow metal is considered to be a safe haven commodity, which investors use to hedge against inflation in times of uncertainty,” Aslam said in a Monday note.

Also on Comex, March copper
HGH22,
+0.22%

shed nearly 0.1% to $4.284 a pound. January platinum
PLF22,
-0.08%

lost 1% to $924.60 an ounce, while March palladium
PAH22,
+0.67%

declined by 4.3% to settle at $1,674.70 an ounce, down a third-straight session.



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