Gold prices edged higher in early Asian trade on Monday, ahead of the Federal Reserve’s September policy meeting on Wednesday. Investors are keenly awaiting the Fed’s decision, as it will have a significant impact on global bond yields and, by extension, gold prices.
Lower bond yields tend to boost the appeal of gold, as the yellow metal does not generate any income. However, higher bond yields can weigh on gold prices, as they make other investments more attractive.
In a research note, Oanda analyst Craig Erlam said that the Fed meeting will be a “big event” for gold, as the central bank will not only announce its latest interest-rate decision but also release new economic forecasts.
“The Fed’s decision will affect global bond yields, which is key to gold prices,” Erlam said. “Lower bond yields tend to boost the appeal of the non-interest-bearing metal.”
Spot gold was up 0.1% at $1,925.92 per ounce as of early Asian trade on Monday.
In addition to the factors mentioned in the original article, there are a few other things that investors should keep in mind when considering the outlook for gold prices ahead of the Fed meeting:
- The strength of the US dollar: Gold and the US dollar tend to move in opposite directions. A stronger US dollar makes gold more expensive for foreign buyers and can weigh on prices.
- The global economic outlook: If investors are concerned about a recession, they may flock to gold as a safe haven asset. This could support gold prices, even if bond yields rise.
- Central bank buying: Central banks have been major buyers of gold in recent years. If they continue to buy gold, it could provide a floor for prices.
Overall, the outlook for gold prices ahead of the Fed meeting is uncertain. However, if the Fed signals that it is committed to aggressive rate hikes, it could lead to a sell-off in gold. On the other hand, if the Fed takes a more cautious approach, it could support gold prices.
Investors should carefully monitor the Fed meeting and its aftermath, and adjust their positions accordingly.