Gold Futures Fall to Three-Month Low, Premiums on Gold Coins Narrow
Gold futures ended Friday’s session with a small loss, but it was enough to take the commodity to a three-month low. During Friday’s session the price of gold declined 0.6% to $1,310.20 an ounce, its lowest price point since June 23. Over the week gold shed 1.8% of its value.
Friday’s loss came as a result of a climbing greenback. The ICE US Dollar index added 0.8% following the release of data that showed US consumer prices increased by a higher-than-expected amount in August. While the inflation report was probably not enough to sway the Fed’s interest rate decision at its impending meeting, it was enough to push the dollar higher, and dollar-denominated gold responded accordingly.
We are currently in the “quiet period” ahead of the Sept. 20-21 US Federal Reserve policy-setting meeting. This means that Fed members are not allowed to speak publicly about US monetary policy. In the absence of Fed commentary to drive the sentiment surrounding interest-rate decisions, the movement of the US dollar will have increased influence on gold prices.
Meanwhile, using gold coin premiums as a proxy for physical gold investment demand, it appears that investors are losing interest in adding physical gold to their holdings. Premiums on gold coins decreased this week, a reversal in sentiment compared to last week when premiums advanced. Premiums on American Gold Eagle coins fell to $59.16 from $60.23, premiums on American Buffalo coins decreased to $60.48 from $61.56 and premiums on Canadian Maple Leaf coins decreased to $46.10 from $46.84.
While market participants currently expect that the Fed will hold off on hiking rates until later in the year, investors are reluctant to add to their gold holdings ahead of the next Fed meeting. This could have happened this week amid quieter trading interest amid holidays in Asia, or, perhaps more likely, investors do not want to add to their gold holdings now that we are approaching the end of the third quarter with the knowledge that a rate hike will most likely occur by year-end, even if current rates are maintained at the next Fed meeting.