Gold holds above $2,000 ahead of Fed meeting

Gold prices have retreated slightly but remain above the $2,000 level as uncertainty regarding the Israel-Hamas war keeps safe-haven demand high ahead of this week's Fed meeting.

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Gold holds above $2,000 ahead of Fed meeting

Continued uncertainty regarding the conflicts in the Middle East has led investors to turn to traditional safe havens, with the yellow metal reaching a 5.5-month high last week. As Israel launched a ground offensive into Gaza over the weekend, markets are waiting to see whether other Arab powers will join the conflict.

However, as markets position themselves for this week's Fed meeting, a strengthening dollar has prevented gold from rising further. The dollar also rose slightly, as did Treasury yields.

Spot gold fell 0.2% to $2,002.22, while December gold futures traded at $2,011.70. Both instruments remained near their highest levels since mid-May.

FED MEETING AND DATA FLOOD EXPECTED

Markets are focused on the results of the two-day Fed meeting on Wednesday. The central bank is expected to keep interest rates steady.

However, investors expect the Fed to reiterate its stance on higher interest rates for longer, especially as recent data shows inflation is rising again and economic growth remains resilient.

Fed officials have left the door open for at least one more rate hike this year. Non-farm payroll data to be released on Friday could influence this outlook. The strength of the US economy also gives the Fed more room to keep rates higher.

High interest rates are a bad sign for gold, as they increase the opportunity cost of investing in the yellow metal. This sentiment hit gold prices last year as global interest rates rose.

The Bank of Japan and the Bank of England will also announce their interest rate decisions this week.

COPPER RISES ON CHINA PMI HOPES

Among industrial metals, copper prices rose slightly ahead of key economic data from China this week.

Copper rose 0.3% to $3.6508, nearing a three-week high.

China's purchasing managers' index, to be released on Tuesday, is expected to show further improvement in manufacturing activity in the world's largest copper importer.

However, gains in copper are likely to remain limited as expectations regarding the Fed meeting have kept risk appetite weak.

News Source: 12punto