Gold price dips ahead of US policy decision
Gold prices eased on Tuesday as a slightly firmer dollar and uncertainty over a US stimulus package kept bullion in check, with investors awaiting cues on future monetary policy decisions from the US Federal Reserve.
Spot gold fell slightly by 0.1% to $1,853.21 an ounce as of 11:30 a.m. EST but held above the $1,850 an ounce level. US gold futures also dipped 0.1% to $1,852.80 per ounce.
″(Gold) is waiting for the Fed, it is waiting for a solid thing to emerge and as long as we continue to see the strength we’ve seen in stock markets over the past couple of weeks, the focus on safe havens is not as strong,” Saxo Bank’s Ole Hansen told Reuters. The Fed is scheduled to begin a two-day policy meeting this week.
GOLD PRICES FELL DESPITE US 10-YEAR TREASURY YIELDS HITTING A THREE-WEEK LOW
Gold prices fell despite US 10-year Treasury yields hitting a three-week low. Lower yields reduce the opportunity cost of holding non-yielding bullion, which typically serves as a hedge against inflation and currency debasement.
″(The) Fall in bond yields yesterday helped offset some of that nervousness that crept into the market from potential inability to reach a (US pandemic relief) deal. If they do reach a deal it might be a watered down version to get it through Congress, so that’s also weighing on (the gold) market,” Hansen added.
US President Joe Biden’s proposed $1.9 trillion pandemic relief bill is currently facing hurdles as Republicans objected to it for being too expensive and pushed for a smaller plan targeting vaccine distribution.
“If the Fed signals that they’re not looking to expand stimulus, and puts the seeds out there that they might have to consider exiting sooner than they currently think … that could be very detrimental for gold,” DailyFX currency strategist Ilya Spivak warned.
