Gold prices rose but the market is still waiting for the Fed's announcement regarding the acceleration of tapering this week.
Gold prices rose limited in Monday's trading session (13/December) with market focus leading to the Fed's monetary policy meeting (FOMC). Spot gold was up 0.3% at $1787.61 an ounce, while gold futures on the Comex in New York were up 0.2% at $1788.50. The XAU/USD chart below also displays a gain of 0.32% to $1788.10 at press time.
At the end of last week, gold prices also gained some gains after the US CPI data was published. US Consumer Inflation rose 0.8% in November, slightly down from the 0.9% rise in the previous period. On an annual basis, US inflation has reached 6.8% and is the highest since 1982.
High inflation makes gold much sought after because of its function as an anti-inflation asset. However, high inflation could also force the central bank to accelerate tapering and raise interest rates, which could trigger higher bond yields and keep gold from rising significantly.
The results of the FOMC meeting which will be announced on Thursday are expected to provide an overview of the acceleration of tapering. But actually, the market is also worried that rising inflation will make the Fed's dot plot more aggressive and disrupt the market.
"In the medium to long term, gold isn't going anywhere until we know how quickly the Fed accelerates tapering and how hawkish their statements are. That will affect yields and put pressure on gold," commented Michael Hewson, analyst at CMC Markets.
Before the Fed announces its policy, the price of gold can certainly tend to be flat. This was stated by Stephen Innes from SPI Asset Management. "With the market waiting for the Fed's instructions to enter into a cycle of rate hikes, gold is only used as a defensive asset for now. That's why demand for gold is still on hold," said Innes.
In addition to the anticipation of the Fed's announcement, the strengthening of the US Dollar also prevented the breakout of gold prices from the range of $1760-$1795 per ounce. The US dollar strengthened a quarter percent ahead of a series of central bank meetings this week.
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