Gold futures settled higher on Monday, recouping some of their recent loss as investors awaited what’s widely expected to be the Federal Reserve’s third interest-rate hike of 2018 this week — a well-telegraphed move to markets.
December gold GCZ8, +0.22% rose $3.10, or 0.3%, to settle at $1,204.40 an ounce. It settled Friday at $1,201.30, its lowest level in a week even as it ended little changed in price for all of last week.
Gold found support as the dollar index DXY, -0.02% tilted slightly lower on Monday. The dollar and gold, which is chiefly priced in the U.S. currency, tend to move inversely. Gold prices based on the most-active contracts have declined by 8% so far in 2018 as the dollar index is up about 2.2% for the year to date, a divergent move driven in large part by the Fed tightening U.S. monetary policy more aggressively than the rest of the developed world.
Fed policy makers will meet for a two-day meeting ending Wednesday and the market is pricing in over a 90% chance of a quarter-point rate increase. The Fed has penciled in four moves in total this year and that means another hike is likely in December, though traders have shown some flashes of wavering confidence of late, citing trade uncertainty and global economic hiccups. That uncertainty puts added emphasis on the Fed’s statement.
Higher interest rates tend to boost the dollar and cut demand for nonyielding bullion in favor of assets delivering an attractive relative yield.