Gold price drops as investors eye US rate decision

Gold fell to a one-month low and trading volume declined as investors held off on making big moves before Federal Reserve policymakers meet next week.

While Fed fund futures show that traders have backed away from expectations that the Central Bank will tighten this month, economists surveyed by Bloomberg are still nearly balanced between those who expect a rate rise and those who say officials will delay any action.

Higher borrowing costs reduce bullion’s allure because it doesn’t offer returns, unlike assets such as bonds or equities. Fed policymakers meet from September 16 to 17.

Gold is headed for a third straight annual loss as steady growth for US jobs and the economy strengthened the dollar and bolstered the case for the Fed to raise interest rates for the first time since 2006.

Futures trading was about 20% below the 100-day average yesterday, data compiled by Bloomberg show.

“There’s no help for gold today as we wait for the Fed,” George Gero, a vice president of global futures at RBC Capital Markets in New York, said.

“After a hike, that boosts the dollar, and a strong dollar is a main reason for the sellers in gold.”

Prices headed for a third straight week of declines, the longest streak since late July.

Silver futures also fell on the Comex.

Platinum and palladium retreated on the New York Mercantile Exchange.

Bloomberg


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