July 28, 2015

Gold Holds Drop as Investors Await Federal Reserve’s Rate Signal

(Bloomberg)- Gold held a decline as investors weighed the prospects for a U.S. interest rate rise with Federal Reserve policy makers scheduled to meet.

Bullion for immediate delivery was little changed at $1,094.77 an ounce at 12:08 p.m. in Singapore after dropping 0.5 percent on Monday, according to Bloomberg generic pricing. Gold last week fell to $1,077.40, the lowest since February 2010, on speculation U.S. rates will climb this year, curbing the metal’s appeal as it doesn’t pay interest like competing assets.

U.S. central bankers will begin their two-day meeting on Tuesday in Washington to assess monetary policy and the pace of the recovery. While economists surveyed by Bloomberg see no chance that they’ll raise rates this week, they put the odds of a September increase at about 50 percent. Gold’s dropped 16 percent over the past year as investor holdings shrank and a gauge of the dollar advanced 19 percent.

“The market is waiting for its next cue,” Jordan Eliseo, chief economist at Australian Bullion Co., said by phone from Sydney. “A bounce-back, even if only temporary, wouldn’t be unexpected, especially if the Fed is a little dovish.”

Citigroup Inc. lowered its three-month forecast on Monday, while Macquarie Group Ltd. on Friday said gold has lost its appeal as a commodity and as an alternative to currencies. The Bloomberg Dollar Spot Index was little changed Tuesday after it capped a fifth weekly advance Friday.

Chinese Shares

A rout in Chinese shares as the Shanghai Composite Index sank the most in eight years Monday is probably also paring gold demand, according to David Lennox, a Sydney-based resources analyst at Fat Prophets. There’s a pullback to the safety of currencies and fixed interest rates, he said.

Gold for December delivery, the contract with the most open interest, declined 0.2 percent to $1,094.30 an ounce on the Comex in New York. Most-active prices fell 4.1 percent last week, dropping to $1,073.70 on Friday, the lowest since 2010.

Silver for immediate delivery rose as much as 0.5 percent to $14.6375 an ounce, and was at $14.6071. Platinum was 0.2 percent lower at $980.90 an ounce after dropping to a six-year low on July 20. Palladium rose 0.8 percent to $617.85 an ounce, after it fell last week to the lowest price since October 2012.