Yesterday, Jan. 27th, Gold rose 1 percent while the dollar and shares softened just as the U.S. Federal Reserve policy meeting began. Experts believe this meeting could be the catalyst for U.S. interest rates and the eventual rise.
As the first of two annual meetings for the Fed, investors presume the uncertain global outlook will be the key talking point and expect promises of patience on tightening to be kept. Spot gold was up 1 percent at $1,293.06 an ounce. The precious metal fell 1.6 percent in the following two sessions due in part to strong equities and reservations over the Greek election. Gold also reached a five-month high of $1,306.20 this past Thursday.
February options expired with heavy open interest around $1,275, $1,280 and $1,300 as traders reported U.S. gold futures for delivery in February settling up 1 percent at $1,291.70 an ounce. “February options expiry today is helping gold, also of course the weak dollar, weak politics in (European) areas,” said George Gero, precious metals strategist for RBC Capital markets in New York. Safe-haven buyers returned to the gold market after these recent events combined with the Fed meeting.
On the heels of unfortunate U.S. corporate earnings reports and with declining U.S. durable goods orders, the global stock indexes dropped with the dollar falling 1 percent amidst a bevy of leading currencies. “The FOMC (Federal Reserve’s Federal Open Market Committee) meeting could give a bit of a boost if the Fed acknowledges the global … headwinds and that inflation is not a problem,” says Robin Bhar, a Societe Generale analyst.
The Fed’s timetable is still scheduling a mid-year increase in rates, which would boost the dollar and negatively affect bullion. With an average of $1,234 an ounce on the year, gold is looking at its thirds year of losses. The U.S. on the other hand, is looking at a hike in interest rates for the first time in almost a decade.
