Gold Volatility Rises as Fed Seen Delaying Interest-Rate Liftoff

Updated on

Gold traders are going cross-eyed waiting for more guidance from the Federal Reserve on when policy makers plan to raise interest rates.

The metal’s 30-day volatility is near the highest in seven weeks. Futures on Tuesday swung between gains and losses, before climbing. Economists surveyed by Bloomberg News expect that the Fed’s long-awaited liftoff on its benchmark rate won’t happen until September. Officials will issue a policy statement at the end of a two-day meeting on Wednesday.

Investors in March sold the most gold from exchange-traded products since December 2013, partly in anticipation of higher rates that spur traders to favor assets with better yield prospects, such as equities. Recent signs of uneven U.S. economic growth have damped speculation that rates will rise soon, and assets in bullion ETPs are heading for a monthly gain in April.

“Gold is going through this series of push and pull,” Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “It’s a tough trade.”

On the Comex, gold futures for June delivery advanced 0.9 percent to settle at $1,213.90 an ounce at 1:54 p.m. on the Comex in New York.

Prices on Monday surged 2.4 percent, the biggest gain since Jan. 15. The move came a session after futures tumbled by the most since early March.

Traders Whipsawed

Traders are getting whipsawed as they parse economic reports for clues on when rates will rise. Policy makers will assess the impact of a harsh winter and a stronger dollar against some signs of gains for housing. A hiring slowdown last month is adding to caution inside the Federal Open Market Committee, according to Thomas Costerg at Standard Chartered Bank in New York.

That view that the Fed will wait longer before tightening has bond traders worried about inflation again and means that the dollar is losing some of its luster. Lower rates help to boost the appeal of gold, which generally offers returns only when prices rise. The metal is also a traditional hedge against higher consumer costs and an alternative to the U.S. currency. The benchmark federal-funds rate has been kept near zero since December 2008.

Silver futures for July delivery climbed 1.2 percent to $16.63 an ounce. Prices gained 4.8 percent on Monday, the most since December.

Platinum futures for July delivery increased 0.5 percent to $1,158.60 an ounce on the New York Mercantile Exchange, after increasing on Monday by the most since September 2013. Palladium futures for June delivery slid 0.2 percent to $781.15 an ounce.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE