Gold futures traded mostly lower on Wednesday, stuck to a tight trading range following a loss in the previous session, as investors weighed overall strength in the U.S. dollar and looked for further hints on the Federal Reserve’s plan for interest rates.

Price action

  • Gold for December delivery

    was down $6.60, or 0.3%, at $1,946 an ounce on Comex, after ending the previous session at its lowest in around a week. It’s trading between a low of $1,946 and high of $1,954.50,

  • December silver
    was down 34.8 cents, or 1.5%, at $23.525 an ounce.

  • December copper
    traded at $3.822 a pound, down 2.7 cents, or 0.7%.

  • Platinum for October delivery
    fell nearly 1.9% to $915.60 an ounce, while December palladium
    shed 1.8% to $1,192 an ounce.

Market drivers

On Wednesday, gold investors looked to comments from Boston Fed President Susan Collins who said she believes the U.S. economy will start to soften as the year draws to a close and expects weak growth to persist in 2024.

The Fed may be near, or at, the peak for the Fed’s policy rate, she said, but further monetary tightening could be warranted, depending on the data.

Economic data Wednesday, however, was upbeat, with the U.S. ISM barometer of business conditions at service companies rising to 54.5% in August from 52.7%. That was the eighth reading above the 50% threshold that indicates expansion of the economy.

The dollar strengthened after the data. The ICE U.S. Dollar Index
a measure of the greenback against a basket of six other major currencies, was up 0.2% to 104.96, trading at the highest in roughly six months.

The dollar was also lifted by weak economic data from China and the eurozone on Tuesday, which left the U.S. looking relatively more attractive.

A stronger dollar can be a negative for commodities, making them more expensive to users of other currencies, while higher interest rates raise the opportunity cost of holding nonyielding assets like gold.

“Until the dollar peak is in place and Treasury yields start dropping, gold is going to have a hard time mustering up a rally,” said Edward Moya, senior market analyst at OANDA.  

A surge in oil prices after Saudi Arabia and Russia announced an extension of production cuts also served to stoke inflation worries, reinforcing expectations the Federal Reserve will keep interest rates elevated.

The medium-term direction of gold looks unclear while investors and traders remain unconvinced of the true health of the global economy, said Rupert Rowling, market analyst at Kinesis Money, in a note.

“So while further hikes, particularly in the U.S., are looking less likely, gold looks set to have to endure a period of high interest rates, reducing the appeal of the asset against other interest-bearing classes, such as bonds,” he wrote.

Rowling argued that it was “remarkable” that gold managed to continue to trade above $1,900 an ounce with interest rates above 5% in the U.S. and U.K. and near that level in Europe.

“Lingering fears that the world is heading for a recession and market confidence that is still very fragile following shocks such as the U.S. banking crisis earlier in the year have ensured that gold’s safe haven qualities have continued to appeal,” he said.

Meanwhile, prices for platinum moved lower, poised for a fifth straight session loss, FactSet data show, even as the World Platinum Investment Council forecast in a report released Wednesday that the metal will see its largest annual supply deficit on record this year.


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