Gold prices remained within a tight range on Monday as traders prepared for an expected interest rate hike and awaited signals about future monetary policy from the Federal Reserve. As of 10 a.m. EDT (1400 GMT), spot gold stood at $1,959.39 per ounce, showing little change. Meanwhile, US gold futures experienced a 0.3% decline, settling at $1,961.20. The market sentiment suggested that traders believe the Fed may be nearing the end of its rate-hiking cycle, according to Bob Haberkorn, senior market strategist at RJO Futures.
Amidst ongoing geopolitical tensions, gold may have found some support from safe-haven demand. Last week, Russia's actions of destroying Ukrainian grain warehouses on an export route for Kyiv after backing out of the Black Sea grain deal might have influenced the market. The situation added to uncertainties, prompting some investors to seek refuge in gold. Such geopolitical factors have the potential to affect the Forex market significantly, as traders closely monitor these developments for potential impacts on currency values.
However, the primary focus remains on the upcoming Federal Reserve and European Central Bank decisions on interest rates this week. Both central banks are anticipated to raise rates, which can have significant consequences for the Forex market. Gold, being highly sensitive to rising interest rates, faces a higher opportunity cost for investors holding non-yielding assets. Consequently, traders in the Forex market are closely watching these events to gauge the potential impact on gold prices and adjust their positions accordingly.
Carlo Alberto De Casa, market analyst at Kinesis Money, emphasized that any surprising dovish stance from the Federal Reserve could boost gold prices. In such a scenario, there might be a strong likelihood of gold making another attempt to break the $2,000 mark. Forex traders, who are closely monitoring central bank announcements and economic indicators, could respond actively to such developments, as they assess the potential implications on currency pairs related to gold.
The Forex market's impact on gold prices was evident, as the dollar index edged 0.2% higher during the day, which limited the upside potential for gold. A stronger dollar makes gold more expensive for holders of other currencies, influencing their trading decisions. Additionally, euro-denominated gold reached its highest level since July 5, driven by disappointing euro zone business activity data for July. Such events highlight the intricate relationship between Forex movements and gold prices, guiding Forex/Crypto traders in their investment strategies.
In related news, other precious metals also experienced movements in the market. Silver declined by 0.9% to reach $24.36 per ounce, while platinum slid by 0.7% to $955.00, and palladium dropped 0.5% to $1,284.14. UBS analysts, in their note, predicted that platinum could face supply shortages throughout 2023 due to substitution in autocatalysts and lower South African production. Forex traders closely monitor such supply and demand dynamics, as they can influence the prices of precious metals, including gold, in the global market.