Gold eased on Monday, extending last week’s slide, as indications that the Federal Reserve may raise interest rates this year. This is notwithstanding recent market trouble offset a retreat in the dollar. But bullion is still on track to end August higher after scaling a seven-week peak during the month as worries over a slowing Chinese economy sparked safe-haven bids.
Fed Vice Chairman Stanley Fischer said that U.S. inflation is likely to rebound as pressure from the dollar declines, allowing for a gradual rise in rates. He think gold will likely come under further pressure as the Fed decision nears. The investors will rally around the notion that the central bank will indeed move and lift interest rates, said INTL FCS analyst Edward Meir.
China will be another major focus, but perhaps not as much, as the Fed rate hike decision is data-dependent and there is no other data more important than this. Global financial markets looked set for another rough week with stocks, commodities and the dollar losing ground ahead of U.S. data and surveys that are likely to point to further weakness in China. Gold is still on track to end August higher after worries over a slowing Chinese economy sparked a wave of short-covering earlier this month following the metal’s slide to 5-1/2-year lows in July.
Spot gold was flat at $1,133.98 an ounce by 0219 GMT, after dropping more than 2 percent last week in its steepest decline in five weeks. For the month, the metal was up 3.5 percent. The metal fell 2.3 percent last week as a sell-off in Chinese equities rattled wider markets.
Some top policymakers, including Fed Vice Chairman Stanley Fischer, said recent volatility in global markets could quickly ease and possibly pave the way for the U.S. rate hike. The investors, governments and central banks around the world are bracing and analysts, like Meir, are sticking with their view that the U.S. central bank could still hike rates despite the recent collapse in global equities courtesy of increasing worries over China, the world’s No. 2 economy. Meir has tipped a 25-basis point increase in U.S. interest rates, suggesting more downside risk for non-interest yielding gold in the short term.
Hedge funds and money managers hiked a bullish bet in COMEX gold and raised their net long position in silver futures and options in the week ended Aug. 25, U.S. Commodity Futures Trading Commission data showed. Spot silver eased 0.3 percent to $14.54 an ounce, while platinum fell 1 percent to $1,005 and palladium dropped by the same extent to $577.65.
