Gold falls mildly, amid cautious trade ahead of Sept. FOMC meeting
Investing.com -- Gold futures fell mildly on Tuesday erasing slight gains from one session earlier, as metal traders remained cautious ahead of a critical two-day Federal Open Market Committee meeting beginning on Wednesday.
On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a tight range between $1,101.50 and $1,108.50 before settling at 1,103.30, down 4.60 or 0.41% on the session. While gold futures have now closed lower on 14 of the last 20 sessions, the precious metal has still remained relatively flat over the last month due in part to several strong one-day moves. Since August 15, gold is down less than 1% from its level near $1,115.00 an ounce.
Gold likely gained support at $1,089.50, the low from Aug.10 and was met with resistance at $1,132.90, the high from Sept. 3.
For the second consecutive session, investors appeared hesitant to make any major moves before the FOMC issues a closely watched statement on Thursday, where it could raise its benchmark Federal Funds Rate for the first time in nine years. The rate, which banks use to lend to other institutions on overnight loans, has remained at its current level between zero and 0.25% since December, 2008.
Prior to the announcement, the U.S. Department of Labor's Bureau of Labor Statistics will release its Consumer Price Index for the month of August on Wednesday morning. After ticking up by 0.1% in July, the headline reading is expected to remain flat on a monthly basis, amid lower energy prices. The Core CPI Index, which strips out food and energy prices, is expected to increase by 0.2% following modest gains a month earlier.
Last month, Fed vice chair Stanley Fischer indicated that there is good reason to believe that inflation will move higher as the temporary forces such restraining it continue to "dissipate further." Core PCE inflation, the Fed's preferred gauge of price increases, has remained under its long-term targeted goal of 2% for every month over the last three years. Fischer highlighted a stronger dollar and dwindling crude prices as transitory or one-off effects that could recede over the next year.
Fed chair Janet Yellen has also noted that it could take up to 18 months for a change in interest rates to fully impact the economy. The hawkish stance provides support for a modest interest rate hike if the Fed believes inflationary pressures could increase even after rates move higher.
Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in rising rate environments.
Elsewhere, the Shanghai Composite Index fell by more than 3.5% in overnight trading, suffering its sharpest one-day loss in three weeks. After surging by approximately 150% in a 12-month period, Chinese equities have plunged by roughly 40% from its mid-June highs, amid slowing growth forecasts and liquidity concerns.
China is the world's largest producer of gold and the second-largest consumer of the precious metal behind India.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.35% to an intraday high of 95.85, before falling slightly back to 95.74 in U.S. afternoon trading. On Monday, the index to fell to near September lows of 95.29.
Silver for December delivery fell 0.058 or 0.40% to 14.305 an ounce.
Copper for December delivery rose 0.021 or 0.86% to 2.426 a pound.
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