Gold futures were at a high last week after recovering from initial conflicts. Gold strengthened on Monday as the dollar strengthened, although economic uncertainties limited losses for the precious metal as investors awaited developments at central banks.
After a sharp decline at the start of the session on Tuesday, gold prices have risen as suspicion of the global economic recovery has increased as there was pressure from the European Central Bank on Thursday on policy strategies ahead of a stronger dollar and this week’s US Federal Reserve on 16 September.
At the end of the week, gold weakened by the dollar weakening, with the European Central Bank keeping its policy unchanged and raising hopes of a quick economic recovery from the impact of the coronavirus epidemic on a US level.
The market ended the week on a weak note after the US Congress failed to reach an agreement on a coronavirus-assisted package.
Last week December COMEX gold rose $ 13.60 or + 0.70% to close at $ 1947.90. It was at a two-week low of $ 1911.70.
Essentially, the main influences on the price action were the decisions of the ECB and the US Congress. ECB President Christine Lagarde refused to indicate Thursday that the bank would extend the stimulus, while the US Senate blocked a Republican bill for new coronavirus assistance.
Gold has surged by 28% this year, supported largely by stimulus by global central banks, with the precious metal regarded as a hedge against inflation and currency debility. However, even though the ECB did not offer any incentives at this meeting, it left the possibility of additional incentives before the end of the year.
Nevertheless, the ECB news was enough to send the euro higher, the US Dollar index went down and helped support gold prices.
Another surprise that may have helped to weaken gold prices was the news that the US Senate had blocked a Republican bill that would provide about $ 300 billion in new coronavirus aid.
It seems that wherever we look, we see reasons for high prices and reasons for low prices. It is creating a rangebound trade.
Gold is nearing the growth of the COVID-19 vaccine and improving economic data, while low and negative interest rates, a weak US dollar, and expectations of further stimulus keep the balance of risk upside.
After a two-day meeting on September 16, waiting for Federal Reserve announcements, we expect to see the statement very carefully watched. The Fed will have to demonstrate patience before raising rates as it waits for the economy to rebound. But there is bad news. If the economy needs more help, then there may not be so much ammunition left in its arsenal to stimulate the economy. Therefore, we expect Fed Chair Powell to target Capitol Hill and ask Congress to do more.
Bottom Line: The Fed is not expected to say anything bullish for gold