Gold prices appreciated on Aug. 19, moving higher in spite of a rising dollar.
December contracts for the precious metal rose 0.3 percent to $1,302.80 an ounce by 7:37 a.m. on the Comex in New York, according to Bloomberg. Bullion scheduled for immediate delivery increased 0.3 percent to $1,301.98 per ounce, according to generic pricing provided by the media outlet.
Spot gold prices climbed 0.3 percent to $1,301.14 an ounce by 11:57 GMT, Reuters reported. December gold reached $1,302.90 per ounce by that time. During this early trading, the metal fluctuated within a small $5 an ounce range. This very modest volatility could mean that trading volume was meager. VTB Capital analyst Andrey Kryuchenkov spoke to these developments.
“We are still trading in small ranges as there’s hardly any volume,” Kryuchenkov told the news source.
Gold follows greenback higher
These gold contracts appreciated as the greenback moved 0.1 percent higher relative to a basket of major currencies, according to the news source. The dollar hit a nine-month high against the euro, Bloomberg reported. Another factor that coincided with gold’s rise in value was geopolitical tensions in Eastern Europe flaring up once again.
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Global market participants recently got a break from this conflict, evaluating news that key government officials from France, Ukraine, Germany and Russia held a meeting during the weekend in an effort to bring an end to the turmoil afflicting Ukraine, according to The Guardian. Frank-Walter Steinmeier, minister of Foreign Affairs for Germany, commented on the meeting in a statement released before the event.
“It is all about finding a roadmap toward a sustainable ceasefire and a framework for effective border controls,” he said, the media outlet reported. “Only in this way can eastern Ukraine calm down and Kiev continue a national dialogue that appropriately involves the people in the east.”
He added that “a simple recipe does not exist.”
His remarks may have been right on the money, seeing as how forces of the Ukrainian government swept into a district in Luhansk two days later, seizing control of an area that has recently become a bastion for pro-Russian separatists, according to Bloomberg.
Global market participants have also been closely watching developments in the Middle East, where conflict has been raging in the Gaza strip, the media outlet reported. This turmoil has recently enjoyed a pause of sorts, as both Palestinian and Israeli militants previously established a five-day truce to give themselves time to obtain a long-term resolution. However, the major stakeholders in these discussions recently agreed to add 24 hours to their current break from violence.
Investors turn to Fed meetings
Market participants are expected to turn their attention to the upcoming meeting that the Federal Reserve will hold in Jackson Hole, Wyoming. Central bank officials from around the world will congregate at this event, and Janet Yellen, chair of the Fed, will deliver a speech on Aug. 22.
Investors will likely monitor the statements in this particular communication to get a better sense of how the head of the central bank views the labor market, hoping that this information will provide far better insight into the timeline the financial institution will use to increase its benchmark interest rates. These borrowing costs have lingered near record lows for years, and moving them higher could easily have a significant impact on the value of the dollar and also gold.
Many market participants who trade gold flock to the precious metal because they think of it as a safe haven asset. However, they may view the commodity less favorably as interest rates move higher, as gold produces no interest.
Market experts weigh in
Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., commented on these developments in a report, according to the media outlet.
“Later this week, the focus will turn toward the release of the FOMC minutes and Fed Chair Yellen’s testimony,” Chinchalkar told the news source. “With geopolitical headwinds not escalating, with the dollar looking strong and with physical buying lacking, we feel that gold will face strong headwinds in sustaining gains in the near term.”
MKS weighed in on the impact of the upcoming Fed statements, according to Reuters.
“Traders will be watching eagerly later in the week at the FOMC minutes and Jackson Hole address to gauge any clues to the timing of a Fed rate hike,” the company wrote in a note, the media outlet reported. “Any major developments at these events could provide the catalyst to tease gold out of the monotonous $1290-1320 range we have traded over the past 2 months.”
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