Metals: Gold Prices Inch Lower Ahead of Fed Meeting

By Amrith Ramkumar Features Dow Jones Newswires

Gold prices swung between small gains and losses Tuesday, with many investors awaiting the next Federal Reserve policy statement for clues about future interest-rate increases.

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Gold for December delivery closed down less than 0.1% at $1,310.60 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen in six of the last seven sessions after hitting their highest level in more than a year earlier this month, weighed down by easing tensions between the U.S. and North Korea and a stronger dollar.

Many investors and analysts are waiting to see how the Fed discusses inflation and the prospects for future rate rises at its two-day meeting starting Tuesday. The U.S. central bank's policy statement and Chairwoman Janet Yellen's press conference are scheduled for Wednesday afternoon.

Division among Fed officials about when to raise interest rates amid weaker-than-expected inflation has boosted gold prices in recent weeks because the precious metal struggles to compete with yield-bearing assets like Treasurys when borrowing costs rise. However, the latest core inflation reading last week was the strongest in months, which could push the Fed to raise interest rates for a third time in 2017, investors and analysts have said.

Although that decision is widely expected to come in December, the Fed's discussion this week about economic data and how quickly it wants to start shrinking its balance sheet could sway gold prices.

"If the language does provide further illumination to the Fed's intentions in December, I definitely think that will move gold prices," said Rory Johnston, a commodity economist at Scotiabank. Mr. Johnston said he expects the Fed to raise rates in December, which along with a stronger dollar, could push gold back down toward $1,250 a pound.

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Investors were also keeping an eye on the United Nations General Assembly meeting Tuesday to see how world leaders discuss recent geopolitical turbulence. Many investors favor haven assets like gold amid political uncertainty.

Gold prices were little changed after President Donald Trump threatened to annihilate North Korea if the country fails to abandon its pursuit of nuclear weapons. Investors and analysts have said that it would likely take a more provocative action not yet seen to inject fear back into the markets and support gold prices.

"The market has become somewhat insensitive and immune to all the heightened rhetoric," said Jason Mayer, senior portfolio manager at Sprott Asset Management.

A weaker dollar was supporting prices slightly Tuesday by making gold, a dollar-denominated metal, cheaper for foreign buyers. The WSJ Dollar Index, which tracks the U.S. currency against 16 others, was recently down 0.2%. The dollar bouncing higher off multiyear lows hit earlier this month has hurt gold prices in the past week.

Among base metals, copper for December delivery closed little changed, up less than 0.1% at $2.9695 a pound. The industrial metal has fallen more than 5% from nearly three-year highs hit earlier this month after weak import and industrial production data out of China, which is responsible for nearly half the world's copper consumption. Many investors and analysts are waiting to see how a key Communist party leadership transition plays out next month.

(END) Dow Jones Newswires

September 19, 2017 15:13 ET (19:13 GMT)