Gold inches lower, silver tumbles to begin new week

Gold futures were pressured lower Monday morning in the US amid continued dollar pressure and a general market hesitancy ahead of the upcoming Federal Reserve meeting.

Gold for December settlement on the Comex division of the New York Mercantile Exchange was last down $3.40 or 0.3 percent to $1,331.10 per ounce. Trade has ranged from $1,327.0 to $1,333.80.

Residual dollar strength is weighing on the precious metals complex with the greenback last trading at a one-week high at 95.28 on the dollar index – the index has risen for four consecutive days.

With the Federal Open Market Committee (FOMC) roughly a week away, the investment community has headed to the sidelines amid continued uncertainty on how the policy-board will act.

In recent weeks, various Fed members have outspokenly championed a near-term rate hike despite uneven US data and questions over the health of the global economy.

“The bear camp retains an edge as the fear of the Fed and strength in the dollar will be difficult to reverse or discount the face of a very thin US economic report slate early this week,” The Hightower Report noted. “In fact, an extension of risk-off sentiment and weakness in a long list of physical commodities leaves gold and silver entrenched in a negative track.”

The main market event is here in Chicago today with Fed governor Lael Brainard delivering the final monetary speech before central bank officials enter the quiet period ahead of the September meeting.

Prediction markets are currently assessing only a 21 percent chance that the Fed increases the Federal Funds rate by 25-basis points and investors aren’t expecting another hike until 2017, according to the CME Group FedWatch.

On Friday, Boston Fed President Eric Rosengren, who has been one of the more dovish members on the central bank’s policy board, said that the economy could overheat if interest rates stay unchanged for too much longer.

“With a still relatively low likelihood of a September rate rise priced into the market, a hawkish speech… would very likely put bullion come under distinct selling pressure,” HSBC analyst James Steel said. “On the other hand, a markedly dovish speech may not be especially bullish for gold, as the market, at least up until Mr Rosengren’s speech, had ascribed a relatively low probability to a September rate rise.”

Meanwhile in paper holdings, investors sold 8.5 tonnes of exchange-traded-funds (ETF’s) tracked by FastMarkets over the weekend, bringing the total to 2,105 tonnes. Recently, holdings had reached the highest mark since June 2013, but with the Fed meeting approaching, investors appear to be heading to the sidelines.

The economic calendar is fairly quiet today – Japan’s PPI dropped 3.6 percent while other Japanese data on machine and tool orders was mixed. Italian quarterly unemployment rate was as expected at 11.5 percent.

Later today the US CB leading index is slated for release.

Turning to international markets, Germany’s DAX and France’s CAC-40 were both down 1.8 percent, while the dollar strengthened 0.1 percent to $1.1229 against the euro.

As for other precious metals, Comex silver for December settlement tumbled 45.8 cents or 2.4 percent to $18.910 per ounce – the lowest point since August 31. Trade has ranged from $18.765 to $19.220.

Platinum for October settlement declined $16.90 or 1.6 percent to $1,050.60 per ounce, while the most active palladium contract was last trading stood at $665.75 per ounce, down $13.70.

(Editing by Tom Jennemann)

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