Gold Goes Nowhere as Narrow Range Seen Before Fed Rate Decision

  • Further tightening after interest-rate liftoff may be gradual
  • Holdings in exchange-traded ETPs were little changed Wednesday

Gold is going nowhere as investors expect trading within tight ranges before next week’s Federal Reserve meeting, where policy makers are forecast to raise interest rates for the first time since 2006.

Aggregate trading in bullion futures was 34 percent below the 100-day average, according to data compiled by Bloomberg. Gold, which touched a five-year low last week, was little changed the past two days. Prices fell on Thursday as a stronger dollar reduced the appeal of the metal as an alternative asset.

Traders are pricing in 76 percent odds that borrowing costs will be increased at the Federal Open Market Committee gathering on Dec. 15-16, a decision that would damp the allure of bullion because it doesn’t pay interest. Gold has swung between gains and losses the last two weeks as Fed Chair Janet Yellen, along with Fed Bank of St. Louis President James Bullard, have said the pace of tightening will be gradual.

“Everyone is waiting for the Fed with one week to go,” Graham Leighton, a trader at Marex Spectron in New York, said in a telephone interview. “We’ll probably get 48 hours of pandemonium in gold after the announcement, and then we may be done for the year.”

Gold futures for February delivery slid 0.4 percent to $1,072 an ounce at 1:43 p.m. on the Comex in New York, dropping for the first time in three sessions.

The Bloomberg Dollar Spot Index, a measure of the greenback against 10 currencies, rose as much as 0.4 percent. South African gold miners, the world’s highest-cost major producers, surged in Johannesburg as the rand plunged against the dollar after President Jacob Zuma fired his finance minister.

“A stronger dollar means weaker gold for sure,” Leighton said.

Holdings in gold-backed exchange-traded products were little changed at 1,465.4 tons as of Wednesday, data compiled by Bloomberg show. They increased on Tuesday for the first time since Nov. 17 and were up from the lowest in more than six years.

Silver futures for March delivery slid 0.6 percent to $14.11 an ounce on the Comex. On the New York Mercantile Exchange, platinum and palladium fell.

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