Gold Hits Snooze Button Ahead of Fed Rate, BOJ Policy Decisions

  • Metal’s 60-day volatility falls to lowest in 13 months
  • Gold, copper prices little changed ahead of Fed meeting

Gold traders are taking a snooze a day before Federal Reserve and the Bank of Japan announce their monetary policy decisions.

The precious metal’s 60-day historical volatility has fallen to the lowest in 13 months. Aggregate trading on the Comex in New York slumped 45 percent below the 100-day moving average for this time of day, data compiled by Bloomberg show. Open interest, a tally of outstanding contracts, is down 14 percent from a record in July. Gold and copper prices swung between small gains and losses.

After posting the best first half in almost four decades, the gold rally is stalling amid uncertainty on the rate hike path, particularly in the U.S. Low rates and stimulus from central banks including the BOJ benefited non-interest bearing precious metals. While traders are pricing just a 22 percent chance that the Fed will hike rates on Wednesday, a surprise move could trigger a sell-off, prompting investors including asset manager Cohen & Steers Capital Management to pare their gold positions.

“The combination of the two central banks releasing their interest rate decisions has the bulk of the markets on hold, in anticipation of that,” David Meger, the director of metals trading at High Ridge Futures in Chicago, said in a telephone interview. “The fate of the dollar, the currency markets and the precious metals markets are really going to lie on the back of the Fed meeting.”

‘Sit Back and Wait’

Gold futures for December delivery gained less than 0.1 percent to settle at $1,318.20 an ounce at 1:48 p.m. on the Comex in New York. Prices are down 0.2 percent this quarter, after rising 25 percent in the first half of the year.

Copper futures for delivery in December advanced 0.4 percent to $2.165 a pound on the Comex, after falling as much as 0.5 percent.

“We remain completely spellbound by the Fed, and ahead of today and tomorrow’s meeting the markets will do very little,” said David Govett, head of precious metals trading at Marex Spectron Group in London. “So sit back, make yourself comfortable and wait for the fireworks, or lack of, tomorrow.”

Economists surveyed by Bloomberg are split over the likely outcome of the BOJ meeting ending Sept. 21, with just over half predicting an expansion of stimulus. The BOJ will announce its decision Wednesday at the conclusion of the meeting that includes a comprehensive review of its policy program. Governor Haruhiko Kuroda is scheduled to hold a press conference, while the Fed statement will follow later on Wednesday, with a news conference from Chair Janet Yellen.

In other news:

  • Holdings in exchange-traded funds backed by the metal slid 2.7 metric tons to 2,021.6 tons, according to data compiled by Bloomberg as of Monday.
  • Silver futures fell on the Comex in New York. On the New York Mercantile Exchange, platinum futures rose while palladium futures declined.
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