Gold prices held steady on Tuesday, supported by a weaker dollar. with this cryptocoin.com As we reported, price action was also limited as investors await the US Federal Reserve policy meeting for more clarity on tapering plans. Spot gold fluctuated short-frequently at $1,764.46, while US gold futures rose 0.1% to $1,765.00 an ounce.
Michael Hewson: Fed’s tapering decision will put downward pressure on gold prices
“The big question to be answered is whether the current market uncertainty will change any possible timelines the Fed may have when it comes to announcing that it will cut back on asset purchases,” Michael Hewson, chief market analyst at CMC Markets UK, comments.
More than anything else, this will put downward pressure on gold prices.
The US central bank will wrap up its two-day meeting on Wednesday. Some market watchers think that asset purchases will be reduced in the fourth quarter, which could push gold down as a result.
“Long-term, gold prices are still on the downside”
Bullion is considered a hedge against possible inflation and currency depreciation from broad stimulus. Surprisingly, a hawkish Fed stance and eventual rate hike could also dampen bullion’s appeal, as it increases the opportunity cost of holding interest-free assets.
What gave gold some respite was the US dollar’s decline of 0.1% after hitting a nearly one-month high in the previous session. In the meantime, the mood began to prevail, with world stocks stabilizing and investors confident that the contagion from the woes of debt-ridden Chinese developer Evergrande would be limited. IG Market analyst Kyle Rodda comments on the possible impact of the developments on gold:
In the long run, gold prices are still bearish as we will continue to see the Fed move to normalize monetary policy, which is generally not a good environment for gold.
Jim Wyckoff: September is historically turbulent for stock and financial markets
Gold futures rose for the first time in four sessions on Monday, as global markets tumbled significantly after the Chinese real estate market slumped. Senior analyst Jim Wyckoff states the following in his market comments:
A major risk-free trading day in a historically turbulent September for equity and financial markets. Chinese real estate developer Evergrande is in deep financial trouble, and traders and investors are very worried about a contagious effect. The market is wondering if a big sell-off in global equities and financial markets earlier this week will affect the Fed’s debate over tapering timing.
“Gold prices could rise if Fed approves December cut”
Gold prices have been under pressure in recent sessions as a result of strong economic data from the United States, which supports the belief that the Fed will reduce its $120 billion monthly Treasury and mortgage-backed securities purchases before the end of 2021. The analysis by Chintan Karnani, research director of Insignia Consultants, is as follows:
Whether the reversal of gold’s current price is a bearish rally, a short-term bullish amid a bear market, or a sustained trend reversal will only be known after this week’s FOMC meeting. I expect the FOMC meeting to continue to suggest that tapering is tied to overall US economic performance, not just employment.
Chintan Karnani also expects tapering to be confirmed in December at Wednesday’s FOMC meeting. The analyst estimates that this move has been more or less taken into account by gold traders, so gold prices could rise if the Fed approves the December cut.
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