Gold to see choppy trade in coming weeks ahead of US Fed meeting

Gold will witness choppy trade in the next two weeks ahead of the US Federal Reserve Meeting on January 26, analysts say.

Gold prices closed at $1,817.43 per ounce on Friday, down 0.20 per cent. In the UAE, 24K was trading at Dh220.25 per gram on Sunday, 22K at Dh206.75, 21K at Dh197.5 and 18K at Dh169.25.

“Gold may be in for a choppy period until the January 26 Federal Open Market Committee (FOMC) meeting. Gold traders want more clarity on how aggressive the Fed may be in reducing the balance sheet as that will dictate how high rates on the back-end of the curve can go,” said Edward Moya, senior market analyst at Oanda.

David Song, strategist at Daily FX, said the price of gold struggles to hold its ground after showing a kneejerk reaction to the dismal US retail sales report, and the precious metal may trade within the monthly opening range ahead of the next Fed interest rate decision on January 26 as central bank officials go off the wires.

“It remains to be seen if the Federal Open Market Committee will react to the mixed data prints coming out of the economy as Fed chairman Jerome Powell strikes a hawkish tone in front of US lawmakers, and speculation for an imminent change in regime may produce headwinds for bullion as the central bank appears to be on track to implement higher interest rates over the coming months,” said Song.

Naeem Aslam, chief market analyst at AVA Trade, said in anticipation of higher interest rates and reacting to higher Treasury yields over the past few weeks, the price of the precious metal has been falling in recent days. “This is because when interest rates surge, the opportunity cost of holding the yellow metal also rises, making it less appealing to investors.”

Despite the recent decline in prices, the price of the precious metal is still above $1,800. “This is because cases of the new variant are still on the rise and gold is used by investors as a safe haven in times of uncertainty,” added Aslam.