Gold Prices See Volatile Week Ahead of Fed Meeting
Gold prices experienced another volatile week of trading ahead of the Federal Reserve's policy meeting. The metal initially attempted to build on its previous week's recovery, but ultimately fell short as traders priced in a growing chance of a rate hike at next week's meeting. Spot gold started the week at $4,422.50 per ounce and reached its weekly high at $4,442.98 per ounce on Tuesday, but quickly faded as the dollar firmed and rate-hike expectations continued to build.
The selling pressure accelerated Wednesday and Thursday after the release of U.S. producer prices, which showed a rise in August, reinforcing concerns that energy costs and supply disruptions were feeding back into inflation. This led to gold breaking below $4,350 per ounce as Treasury yields climbed and traders priced in a growing chance that the Fed would tighten policy again at its Sept. 15-16 meeting.
The metal rebounded on Friday after August CPI kept inflation pressure alive but did not trigger a fresh panic, allowing dip-buyers to step in near the lower end of the week's range. Despite this recovery, gold failed to reclaim the $4,400 level and ended the week lower on its weekly chart heading into the weekend.
According to the Kitco News Weekly Gold Survey, Wall Street returned to its bullish bias after gold's late-week rebound, while Main Street further pared back its bullish majority following another weekly decline. Marc Chandler, managing director at Bannockburn Global Forex, stated that 'gold may trade higher into the FOMC meeting,' with a technical objective of $4,460-$4,510 per ounce.
However, if the Fed decides not to hike rates, gold could quickly rebound, and Adam Button, head of currency strategy at investingLive, noted that 'the failure to hike could see gold rally.' Darin Newsom, senior market analyst at Barchart.com, is also bullish on gold, stating that it may gradually work its way up to the target of $5,000 if rates are not raised.
On the other hand, Bob Haberkorn, senior commodities broker at StoneX Group, believes that precious metals prices can't really go much lower because rates probably can't go substantially higher. He also expects a shallow pullback in metals if the Fed delivers a 25-basis-point rate hike.