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Gold futures headed higher for a second straight session Tuesday morning, as the U.S. dollar edged back, helping to extend gains for the precious metal which has been partially supported by worries about stemming from a downturn in China’s property market.
Traders also are positioning ahead of a Federal Reserve policy statement and interest-rate projections at the conclusion of the meeting on Wednesday.
December gold
GCZ21,
was trading $3.60, or 0.2%, at $1,767.40 an ounce, following a 0.7% rise on Monday, which halted a three-session skid. Keeping bullion’s gains in check was a rebound in global equity markets, including futures for the Dow Jones Industrial Average
DJIA,
and the S&P 500 index
SPX,
and a rise in government bond yields, following Monday’s risk-off session, which was highlighted by increased appetite for safe-haven assets.
Tuesday trading action suggests that the anxieties over the outlook for China’s highly leveraged property developer Evergrande have subsided for now, but that hasn’t entirely sapped demand for precious metals, with the Fed set to conclude its policy meeting on Wednesday afternoon, which could prove a catalyst for commodities.
“For gold traders, the direction of the dollar is going to be just as important as the equity markets. To this end, the US currency might perform mixed until at least the FOMC day on Wednesday,” wrote Fawad Razaqzada, market analyst at ThinkMarkets, in a daily note.
“With risk assets dropping on Monday, the greenback might start to rebound later if sentiment starts to turn cautious again,“ the analyst wrote.
“If the stock market selling returns, this might reduce the prospect of central banks reducing stimulus in the coming months. This should lead to lower yields and potentially a stronger gold price,“ he noted.
Prices for bullion have been under pressure in recent sessions as a result of strong economic data out of the U.S., which has supported the belief that the Fed will taper its $120 billion in monthly purchases of Treasurys and mortgage-backed securities before the end of 2021.
Meanwhile, December silver
SIZ21,
was trading 32 cents, or 1.5%, at $22.53 an ounce, following a 0.6% decline for gold’s sister metal on Monday.
