By Dalton Barker
Gold futures consolidated Monday morning in the US with investors choosing to reassess the market following Friday’s major upswing.
Gold for December settlement on the Comex division of the New York Mercantile Exchange was last down $1.90 or 0.1 percent to $1,355.60 per ounce. Trade has ranged from $1,253.30 to $1,358.80.
“Gold is digesting last week’s sprint higher and traded in an extremely tight range overnight,” Peter Hug, Kitco Metals Global Trading Director, said. “I remain constructive but require the $1,355 level to be overcome. The downside line of $1,338 becomes support.”
On Friday, US second quarter GDP disappointed and raised concerns over the health of the American economy heading into its eighth year of expansion. In response, the US dollar index fell to a multi-week low and was last trading at 95.73.
Conversely, the slightly hawkish Federal Reserve statement was dismissed and market participants are once again pessimistic that the policy-board will adjust rates in the near-term.
“The US economy defied expectations, failing to gain ground in the second quarter, and growth remained as weak as in the first quarter,” Commerzbank said. “Based on Fed Fund Futures, the likelihood of the US central bank (Fed) raising interest rates this year has consequently fallen to just over a third. Before last week’s FOMC meeting the figure was still around 50 percent.”
Meanwhile in investment holdings, paper inflows into exchange-traded-funds (ETFs) tracked by FastMarkets rose 5.74 tonnes to a total of 2,088 tonnes – slightly below the earlier high of 2,091 tonnes.
“There has been profit-taking by funds and their selling has been well absorbed, which suggests sentiment remains bullish,” William Adams, Head of Research at FastMarkets, said. “The net fund position is still large, so we could still see further profit-taking, especially if the rally that started after last week’s FOMC meeting stalls.”