Gold prices traded largely flat on Monday (August 31), with spot gold unchanged at $4,454.47 per ounce as of 5:55 am, according to ET Now. The precious metal slipped below the $4,500-per-ounce mark in the previous session after trading around the $4,600 level earlier on Friday. Spot silver edged higher to trade at $66.50 per ounce, while MCX gold October futures rose 0.28% to ₹1,60,108 per 10 grams in domestic markets. A weaker US dollar generally makes gold cheaper for holders of other currencies, thereby supporting demand for the precious metal. However, expectations of higher interest rates following comments from Federal Reserve Chairman Kevin Warsh capped gains, as the dollar's weakness provided only partial support to bullion prices.
Following Warsh's remarks, expectations of a Federal Reserve rate hike at the September FOMC meeting rose to more than 55%, according to the CME FedWatch Tool, as reported by ET Now. Meanwhile, expectations of a rate hike at the December FOMC meeting climbed to around 90%. Higher interest-rate expectations tend to weigh on gold as the metal does not offer any interest or yield. As yields on interest-bearing assets rise, the opportunity cost of holding non-yielding gold increases, potentially putting downward pressure on bullion prices. The precious metals market is now focusing intensely on the Federal Reserve's interest rate path ahead of the annual Jackson Hole gathering this week, with traders bolstering bets that the central bank will start hiking borrowing costs by year-end.
As of 6:10 am, WTI crude futures were up more than 1% at $84.36 per barrel, while Brent crude futures were trading near the $90-per-barrel mark, according to ET Now. Higher energy prices can add to inflationary pressures, making the trajectory of interest rates an important factor for gold investors. The combination of rising crude oil prices and upcoming US economic data, including weekly jobless claims and the employment report, is likely to influence the Federal Reserve's monetary-policy outlook. Market participants will focus on these indicators along with other factors that could guide the next move in bullion prices.
Despite the recent retreat, gold remains up 12% this month following the US Treasury's unexpected intervention in the bond market last week. According to Bloomberg, the efforts to control the cost of the US debt pile have revived interest in the so-called debasement trade that helped power gold's record-breaking rally last year. Bullion-backed exchange-traded funds tracked by Bloomberg added more than 28 tons last week, the most since January, indicating wider investor participation in the rally. TD Securities analysts noted that gold's marked rebound has taken the metal above the 200-day moving average, often viewed as an important measure of momentum. On the technical front, Aamir Makda from Choice Broking noted that gold price has remained over 20 and 50-EMA on Weekly chart, with key resistance at $4,895 and potential breakout leading to $5,000-$5,500 levels in upcoming weeks.
