Gold Prices Fall Ahead of Fed Meeting
July 25 2016 - 3:19PM
Dow Jones News
By Ira Iosebashvili and Ed Ballard
Gold prices fell Monday, as some investors braced for the
Federal Reserve's rhetoric to take a hawkish turn at the conclusion
of its monetary policy meeting later this week.
Gold for August delivery settled down 0.3% at $1,319.50 a troy
ounce on the Comex division of the New York Mercantile
Exchange.
Improving U.S. economic data and easing worries about the
negative effects of a U.K. exit from the European Union have
convinced some investors that the Fed has more latitude to tighten
monetary policy this year. Fed-funds futures, a popular vehicle for
traders and investors to bet on the Fed's policy outlook, showed
Monday that investors assigned a 20% likelihood to higher rates by
the central bank's September meeting, up from 12% earlier this
month, according to CME.
The prospect of higher rates tends to weigh on gold, which pays
its holders nothing and struggles to compete with yield bearing
investments when monetary policy tightens.
"The Fed is definitely in the back of people's minds," said
Peter Hug, global trading director at Kitco Metals. "Any scare that
the Fed is considering moving in September could cause a
selloff."
Hedge funds' appetite for gold futures is also on the wane, in
line with a broader pullback across commodities markets.
Data from the Commodity Futures Trading Commission on Friday
showed speculators reduced their bullish position in gold, for the
second consecutive week, in the week ended July 19, although they
retain a sizable net-long position of 252,400 contracts.
Write to Ira Iosebashvili at ira.iosebashvili@wsj.com and Ed
Ballard at ed.ballard@wsj.com
(END) Dow Jones Newswires
July 25, 2016 15:04 ET (19:04 GMT)
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