Gold Has Biggest Drop in Two Months Due to Fed Effect

23 September, 2017, 07:28 | Author: Leticia Walters
  • Reuters

Gold prices swung between small gains and losses Tuesday, with many investors awaiting the next Federal Reserve policy statement for clues about future interest-rate increases. It has gained 0.3 percent on the week.

The US dollar bought 112.27 Japanese yen, higher than 111.46 yen of the previous session.

Earlier on Tuesday, the yen hit a 21-month trough versus the euro at 134.15 yen, while the Swiss franc hit 1.1563 francs, its lowest against it since January 2015. Futures for the Dow and S&P 500 were both flat.

The dollar rose to two-month highs against the yen as the U.S. Federal Reserve suggested it may increase interest rates for a third time this year even as inflation remains below its 2% target.

An index that tracks the USA dollar against six currencies was down 0.3 per cent at 91.780, not far from the more than 2-1/2 year low of 91.011 set on Sept 8.

The British pound is up 0.2% at 1.3534 against the dollar after retail sales rose 1% month-over-month in August, above expectations of 0.2%.

Japan's Nikkei .n225 slipped 0.15 percent, Australian stocks .axjo advanced 0.1 percent and South Korea's KOSPI .ks11 fell 0.7 percent.

INVESTOR INSIGHT: "The Fed's seemingly hawkish views on sustained lift-off in US interest rates may be seen as a form of pressure for regional equities and could dampen prices today", said Jingyi Pan, market strategist at IG in Singapore.

It was widely expected that the United States central bank won't raise interest rates at the meeting but investors believe the Fed will announce the unwinding of its $4.5 trillion balance sheet.

The New Zealand dollar gained 0.6 percent to $0.7360 after reaching its highest level in 6-1/2 weeks as one poll showed the country's National Party pulled ahead of the rival Labour Party ahead of a general election this weekend.

USA stock indexes closed lower on Thursday, with market heavyweight Apple out of favor on concerns about its latest iPhones, while financials rose as investors reacted to rising expectations for a third interest rate hike this year. It also lowered again its estimated long-term "neutral" interest rate from 3.0 percent to 2.75 percent, reflecting concerns about overall economic vitality.

Gold hit a three-week low of $1,293 per ounce, Brent and WTI oil eased away from multi-month highs, while industrial metals copper and nickel tumbled 1.2 and 3.8 percent to more than one-month lows.

The dollar index, which tracks the greenback against six major currencies, was down 0.29 percent at 92.238.

"New Zealand might be set for a market-friendly election result but the bigger picture is being dictated by the FOMC", said Cameron Bagrie, chief economist at ANZ Bank New Zealand.

Oil futures prices rose Wednesday on USA and Iran tensions and expectations that the Organization of the Petroleum Exporting Countries will extend its production-cut deal.

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