Gold remained flat as investors awaited the Fed meeting in early November.
Gold remained flat in Asian markets as investors evaluated whether the central bank would maintain its hawkish interest rate policy for the rest of the year at the Fed meeting next week.
Spot gold has hit over the past few months as the Fed aggressively tightens monetary policy, losing almost 20 percent from its March peak.
The precious metal posted its biggest gain two weeks after the dollar weakened as Japanese officials intervened to bolster the yen. On Monday, the dollar weakened again as it found support from the decline in Chinese stocks.
Attention has now turned to the extent of the Fed’s future rate hike as central banks around the globe try to rein in rising inflation.
While the US manufacturing and services data released Monday showed a dismal picture, the tightening monetary policy has slowed economic activity.
Investors are pricing in that the Fed will raise 75 basis points at its meeting on November 1-2 and 50 or 75 basis points at its December meeting and that the interest rate hike cycle will peak at 4.9 percent in early 2023.
It can be evaluated that further large-scale interest rate hikes may cause new turmoil in the gold market and may put more pressure on spot gold by directing investors to take shelter in the dollar.
“Market participants want to see signs of a pause or an end to the Fed’s rate hikes before they can regain confidence in gold prices,” said Yeap Jun Rong, Market Strategist at IG Asia Pte. The rally carries the risk of selling.”
