Gold Trims Gains Ahead of Fed, Oil, Dollar Leading the Way
Gold prices moved cautiously at the start of the week as the market reconsidered oil prices and the Federal Reserve's policy direction. Gold has yet to gain a strong boost despite the sharp drop in oil prices.
WTI oil is trading around US$83 per barrel after briefly touching US$81.28. Prices are still down more than 6% but have begun to pare losses as Middle East geopolitical uncertainty remains.
Iran stated that the situation in the Strait of Hormuz has not changed and that the strategic waterway remains closed. This statement has fueled concerns about energy supplies and rekindled oil buying.
Gold's movement is now more influenced by the impact of energy prices on inflation and interest rate policy than by demand for safe-haven assets. Rising oil prices could amplify inflationary pressures and open the door to tighter Fed policy.
Markets expect the Fed to keep interest rates unchanged on Wednesday, although the chance of a hike remains around 33%. The probability of a September rate hike also remains high at around 79%, while US PCE inflation data will be in focus on Thursday.
The US Dollar Index is hovering around 101.40 after briefly dropping to 101.12. As long as the dollar and expectations of interest rate hikes remain strong, gold could potentially face pressure, while changes in oil prices and the outcome of the Fed meeting will determine the next direction.
Source: Newsmaker.id
