Investors nervous about the U.S. Fed raising interest rates continued to put pressure on the price of gold on Monday. Worries that positive U.S. economic reports will lead the Federal Reserve to begin ratcheting up interest rates, or that the current volatility in global stock markets will cause the Fed to hold off for a while, have been seesawing the gold price, but it has taken a turn downwards over the last few trading sessions.
Of note, the most actively traded contract, for December delivery of an ounce of gold, was down more than six dollars $1,127.90 a troy ounce on the Comex in early trading Monday.
Keep in mind that gold prices fell 2.2% last week as traders and investors cut back on their holdings of the precious metal with the release of data suggesting U.S. economic recovery is picking up. Data showing growth is improving will make it easier for the Fed to boost interest rates, which has been anticipated for some tome now. Since gold does not pay holders interest or dividends, the gold price is likely to be hamstrung once rates start moving up.
More on Fed policy and the gold price
A number of policy analysts have suggested that the comments coming from Fed governors in Jackson Hole this last weekend made it seem the central bank was likely to adhere its plan to raise rates before the end of the year in spite of shaky global financial markets.
Investors are also looking ahead to Friday’s release of the U.S. employment report, which will give more insight into the U.S. labor market.
“If the data suggests further pressure on average hourly income and increased strength in the labor market, the Fed may have its last window to move, which would have an initial negative impact on gold, but given the China issues, probably a buying opportunity,” noted Peter Hug, global trading director with Kitco Metals Inc., in a recent client note.
