Gold Gains for First Time in Four Sessions as Dollar Weakens

Gold Tries to Snap a Three Day Losing Streak
  • U.S. central bankers will gather this week to assess policy
  • Federal Reserve seen keeping interest rates steady: Streible

Gold snapped the longest slump in three weeks as the dollar weakened, boosting the appeal of the metal as an alternative investment.

The Bloomberg Dollar Spot Index fell, ending the longest rally since January, as traders awaited the Federal Reserve’s decision on whether to raise interest rates for the first time in almost a decade. Policy makers meet this week, and traders put the odds of a rate rise by December at 36 percent. Higher rates curb the appeal of gold because it doesn’t offer yields or interest.

Gold is heading for its biggest monthly gain since January as signs of uneven U.S. growth and faltering expansions abroad spur speculation that the Fed will wait for more assurance that the economy can withstand tighter monetary policy. Bullion extended gains after a government report Monday showed purchases of new U.S. homes slumped in September to a 10-month low.

“The weaker dollar is giving a bit of support to the gold market,” Phil Streible, a a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “It’s widely anticipated that the FOMC won’t do anything this week because of too much global weakness.”

Gold futures for December delivery rose 0.3 percent to settle at $1,166.20 an ounce at 1:50 p.m. on the Comex in New York, ending three straight declines in the longest slump since Oct. 1. Trading on Monday was 38 percent below the 100-day average for this time, according to data compiled by Bloomberg.

The Federal Open Market Committee begins a two-day meeting in Washington on Tuesday. While the Fed is weighing growth, inflation and labor-market data to decide whether to tighten policy, China’s central bank cut rates last week and European Central Bank President Mario Draghi signaled that he may bolster stimulus. 

Gold’s back-and-forth before the Fed meeting has befuddled hedge funds. Money managers have placed wrong-way wagers on the metal in five of the past nine weeks, U.S. government data show. Last week, speculators increased their net-bullish position to the highest since February just before the biggest price drop since August.

“Fluctuations in market expectations for a Fed move are likely to continue driving gold prices and vulnerability to U.S. data persists,” UBS Group AG wrote in a report. “Gold weakness could resume up ahead as a rate hike starts to get priced in again.

Silver futures for December delivery gained 0.5 percent to $15.905 an ounce on the Comex. On the New York Mercantile Exchange, palladium futures for December delivery dropped 1.4 percent to $683.90 an ounce, while platinum futures for January delivery slid 0.4 percent to $997.50 an ounce.

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