Metals Climb on Tepid Volume as Traders Await Fed Rate Decision

  • Gold trading in N.Y. almost 30% below 100-day average
  • Nickel leads advances for industrial metals in London

Gold, nickel and other metals climbed amid tepid trading as investors awaited the Federal Reserve’s decision on U.S. interest rates.

Volume for gold futures in New York is almost 30 percent below the 100-day average for this time, and Comex copper is about 25 percent lower, exchange data compiled by Bloomberg show. The Fed is scheduled to announce its decision on rates at 2 p.m. in Washington.

Most metal markets are heading for an annual loss as Fed policy makers have signaled for months that borrowing costs would probably rise by the end of the year. Tighter monetary policy cuts the appeal of raw materials as stores of value as the dollar strengthens. With gold trading near the lowest since 2010 and copper close to a six-year low, some traders are speculating that prices may be near a bottom as their focus shifts to the outlook for the timing of the next rate increase.

Speculation that policy makers will “reaffirm that the Fed will not raise rates for quite a long time after and paint the picture for one-and-done scenario” may be boosting gold, Phil Streible, a senior market strategist at RJO Futures in Chicago, said in a telephone interview.

Gold futures for February delivery rose 1.2 percent to $1,074.50 an ounce at 11:09 a.m. on the Comex in New York. Silver and copper also climbed on the Comex, and platinum and palladium rose on the New York Mercantile Exchange.

On the London Metal Exchange, nickel added as much as 3 percent, while aluminum, copper, and tin advanced. Lead fell, and zinc was little changed.

The likelihood of higher rates at the meeting today is 78 percent, from 66 percent a month ago, futures data show. Fed Chair Janet Yellen has emphasized the bank will follow a gradual path after an initial move.

The “start of the U.S. rate-hike cycle should ease trade anxiety, but actual inflation is needed for price upside” for gold, Morgan Stanley analysts including Tom Price and Joel Crane wrote in the bank’s quarterly metals report dated Dec. 15.

Assets in gold-backed exchange-traded products fell for a third day to 1,463.9 metric tons as of Tuesday, according to data compiled by Bloomberg. That’s the lowest level since February 2009.

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