Gold Trades Near Two-Week Low as Market Waits for Rate Guidance

(Bloomberg) -- Gold traded near the lowest in almost two weeks as investors awaited policy meetings from the Federal Reserve and Bank of Japan next week, while the market in top buyer China was shut for a holiday.

Gold’s rally this year has stalled amid uncertainty over when the Fed will raise borrowing costs. On Monday, Fed Governor Lael Brainard said there’s no reason to rush to raise rates, while Boston Fed President Eric Rosengren said Friday that the economy may overheat if the bank waits too long. Traders are pricing in a 52 percent chance of a rate increase by December.

Higher interest rates would make gold less competitive against interest-bearing assets, because it doesn’t provide any yield. After surging 25 percent in the first half as the Fed held off raising borrowing costs, the metal has been almost unchanged since then. Trading may be muted today as markets in mainland China, South Korea and Taiwan are shut for holidays.

“The absence of any major macro-economic changes means investors are waiting on the sidelines before next week, when we should get a clearer indication of current thinking” on monetary policy, Robin Bhar, a London-based analyst at Societe Generale SA, said by phone.

Gold Price

Bullion for immediate delivery lost 0.1 percent to $1,321.38 an ounce by 11:29 a.m. in London. It touched $1,314.24 on Wednesday, the lowest since Sept. 2, before closing higher to snap a five-day losing streak.

The Fed is due to announce its next policy decision on Sept. 21, and economists are divided over what the BOJ will do at the end of its policy meeting on the same day. 

“Next week’s Fed and BOJ meetings hold special importance, as September was eyed as the month where monetary policy action will ignite,” Bernard Aw, a Singapore-based strategist at IG Asia Pte, said by e-mail. “But as things stand, I am not expecting both central banks to tweak policy levers.”

In other precious metals news:

• Holdings in gold-backed exchange-traded funds rose 1.1 metric tons to 2,018.9 tons on Wednesday, data compiled by Bloomberg show.
• Silver added 0.2 percent to $18.9933 an ounce.
• Platinum lost 0.2 percent to $1,035.20 an ounce, near the lowest since July 1. Palladium was little changed.

To contact the reporters on this story: Kevin Crowley in Johannesburg at kcrowley1@bloomberg.net, Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net. To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Nicholas Larkin, Jesse Riseborough