Gold subdued as investors await FOMC minutes

Gold prices eased on Wednesday to hover around the $ 1,500 level as investors turned cautious ahead of minutes from the US Federal Reserve’s last meeting, which is expected to shed more light on interest rate cuts.

Spot gold was down 0.5 per cent at $ 1,499.18 per ounce by 0948 GMT, with analysts also attributing the dip to profit-booking following the metal’s recent strong run, which saw it gain more than $ 80 this month.

US gold futures slipped 0.4 per cent to $ 1,509.70.

“The market is nervous while it waits for further cues on the outcome of the Fed meeting minutes” said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.

However, “fundamentals for gold remain positive as central bankers have increased their gold reserves amid geopolitical tension, trade spats and signals of stimulus.”

Minutes from the Federal Open Market Committee’s most recent meeting in July – when the US central bank cut interest rates for the first time in a decade – are due on Wednesday.

Traders are also awaiting the central bank’s annual Jackson Hole seminar later this week with major focus on a scheduled speech by Fed Chair Jerome Powell.

Powell’s comments are of particular interest after last week’s inversion of the US yield curve – widely regarded as a recession signal – boosted expectations the Fed would lower interest rates at its September policy meeting.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

“Gold is declining below $ 1,500, confirming the consolidation phase that has taken place in the last few days,” ActivTrades analyst Carlo Alberto De Casa said in a note

“Despite this, the main trend remains bullish, with further rallies that seems likely in the medium term, while in the short term the scenario is lateral, with prices that could draw a lateral range between $ 1,475 and $ 1,530.”

On the trade front, US President Donald Trump said on Tuesday he had to confront China over trade even if it caused short-term harm to the US economy.

The escalation in the trade war between the world’s biggest economies and an increasingly dovish shift in policy by central banks have contributed to a more than 6 per cent rise in gold this month.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.2 per cent to 845.17 tonnes on Tuesday from Monday.

Among other precious metals, silver eased 0.2 per cent to $ 17.09 per ounce, while platinum dropped 1 per cent to $ 840.07.

Palladium edged 0.1 per cent lower to $ 1,489.76 per ounce.