Gold traded just above $4,000 an ounce late Monday as investors awaited the Federal Reserve’s decision, while Commerzbank analysts said French tensions had yet to spur safe-haven buying, FXStreet reported.
At 11:21 p.m. ET Monday (03:21 UTC Tuesday), spot gold was down 0.2% at $4,007.29 per troy ounce, Reuters reported. December U.S. gold futures fell 0.5% to $4,019.70.
FXStreet attributed the view to Commerzbank analysts Thu Lan Nguyen and Carsten Fritsch, who said lower expected real rates should support gold. They also said France’s bond-market tensions had not yet prompted demand for bullion as a safe haven. The analysts told FXStreet, “the bar for a dovish surprise ... has risen, while the bar for a hawkish surprise has fallen.”
Daily par real-yield data from the U.S. Department of the Treasury put the five-year reading at 2.37% on Oct. 26, compared with 2.34% on Oct. 23; the 10-year reading was 2.66% on both dates. The 20- and 30-year yields each fell one basis point. The Treasury series does not track the short-term market-implied real rate cited in FXStreet’s account.
Reuters said gold fell below $4,000 last week for the first time since mid-July, losing 4% over the week in its steepest weekly decline in about four months. The agency linked pressure on the metal to a firmer U.S. dollar and uncertainty over the Fed’s rate outlook. Reuters said higher rates can make bullion less attractive than assets that pay interest because gold generates no income, a dynamic discussed in EconoTimes’ earlier report on gold and rising U.S. yields.
France’s 10-year government bond yield reached 5.002% on Oct. 21, a 24-year high, and the premium over German Bunds was about 157 basis points, Reuters reported. Reuters said the gap was near levels last seen in 2011. Commerzbank’s Oct. 27 market wrap said the spread had since narrowed significantly.
Reuters said futures pricing implied an 11% chance of a rate increase at this week’s meeting and an 82% chance in December. The Federal Reserve’s calendar lists the two-day meeting as ending Wednesday, Oct. 28, with a policy decision scheduled for 2 p.m. ET and a press conference at 2:30 p.m. ET.