Gold rises as traders eye Fed meeting

Gold prices rose Friday as traders looked ahead to next week’s Federal Reserve policy meeting.

Spot gold traded 0.3% higher at $1,724.37 per ounce. Prices on Thursday fell to their lowest level in more than a year at $1,680.25 before ending 1.3% higher. Bullion has gained 0.7% so far this week.
U.S. gold futures rose 0.5% to $1,723.40.

“Inflation is a double edged sword for gold,” Quantitative Commodity Research analyst Peter Fertig said. Gold on the one hand is seen as a safe haven against rising price pressure while on the other, if inflation exceeds a certain threshold, central banks will raise rates and that is negative for the metal, Fertig added.

The European Central Bank joined global peers in the fight against soaring inflation as it raised interest rates by more than expected, despite the euro zone economy suffering from the impact of war in Ukraine.

Investors now expect the U.S. Federal Reserve to raise interest rates by 75 basis points at its July 26-27 policy meeting. Rising U.S. interest rates increase the opportunity cost of holding non-yielding bullion, while also boosting the dollar, which again makes gold expensive for overseas buyers.

“Having endured a difficult July in which its price has plunged from above $1,800 an ounce to now be languishing around $1,720 an ounce, gold looks to have settled into this new level,” said Rupert Rowling, market analyst at Kinesis Money.

Meanwhile, Britain’s businesses grew at their slowest pace in 17 months in July and inflation pressures eased, according to an industry survey.