Gold Lifted By Improved Physical Demand, Short Covering; Market Awaits FOMC
New York (Sept 15) Gold futures are higher Monday after physical buying emerged in Asia following a recent pullback in prices and as some traders bought to cover short positions, particularly ahead of a meeting of the U.S. Federal Open Market Committee meeting this week.
As of 7:48 a.m. EDT, gold for December delivery was $6.90, or 0.6%, higher at $1,238.40 an ounce on the Comex division of the New York Mercantile Exchange. December silver was up 8.9 cents, or 0.5%, to $18.635 an ounce.
The London a.m. gold fixing was $1,234.75, compared to the previous p.m. fixing of $1,231.50.
December gold initially hit a fresh eight-month low of $1,226.30 overnight before recovering.
“It looks like quite a bit of good physical-related buying came in from the Far East,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. This buying was encouraged by the recent pullback in prices.
Nevertheless, Nabavi said, the U.S. dollar remains strong, so that could limit the upside, at least for now. The euro was down to $1.29240 from $1.29615 late Friday.
“We saw some pretty significant technical moves last week,” said Jonathan Butler, precious-metals strategist with Mitsubishi Corp. “There is possibly a little bit of short covering coming in on the back of that.
“Of course, this week is extremely important from a macroeconomic front. We’ve got a Fed meeting over two days and possibly some kind of (new) forward guidance issued at the end of that. So maybe the market is in wait-and-see mode now and is pretty squared up after a pretty poor week last week. Of course, the big question is if the Fed outlines a timeline for some sort of interest-rate rise, maybe in the early part of next year.”
If so, gold would likely react negatively, he said. But if the Fed should remain dovish, the yellow metal could rise.
“Certainly, on the physical side, it’s looking fairly attractive at current price levels,” Butler said. “So we’ll be watching very carefully what happens in China and India as we move into the festival season there.”
Nabavi said he looks for gold to be in a range of $1,220 to $1,240 in the short term. Should prices resume their slide, the area around $1,180 will be key support, as prices held around here twice in 2013, including the final day of the year before a rally into 2014, he said.
U.S. economic reports on the calendar Monday morning include the New York Federal Reserve’s Empire State manufacturing survey at 8:30 a.m. EDT and the Fed’s release of industrial production and capacity utilization at 9:15 a.m.
The FOMC meeting is scheduled for Tuesday and Wednesday, to be followed by a press conference from Chair Janet Yellen. Observers have said this meeting may be more important than usual as the Fed winds down its purchases of government bonds, known as quantitative easing, and with market participants wondering how far into the future before policy-makers start hiking the federal funds rate, assuming the economic recovery continues.
Source: KitcoNews
