Investing.com – Gold prices dipped in Asia as markets grow cautious ahead of Wednesday’s with the details on the pace of unwinding its balance sheet awaited.
for December delivery on the Comex division of the New York Mercantile Exchange rose 0.14% to $1,312.70 a troy ounce.
Overnight, gold prices fell on Monday as fading tensions on the Korean Peninsula suppressed safe-haven demand while a sharp uptick in the dollar curbed sentiment on the precious metal ahead of the Federal Reserve’s two-day meeting slated for Tuesday.
Fresh on the heels of a two-week losing streak, gold prices started the week on the back foot as investors appeared to unwind some of their long positions in the precious metal following strong gains in both the greenback and treasury yields.
Treasury yields rose sharply, pushing the dollar higher, amid expectations the Federal Reserve will announce that it will begin unwinding its $4.5tn bond portfolio and reaffirm its outlook that an additional rate hike remains appropriate this year, when it concludes its two-day meeting policy meeting on Wednesday.
“What is more, bond yields in the U.S. have increased significantly of late, which makes gold less attractive as an alternative investment,” Commerzbank (DE:DE:) says. “Presumably this is also why Friday saw the second consecutive daily outflow from gold ETFs [exchange-traded funds].”
Gold is sensitive to moves higher in both bond yields and the U.S. dollar – A stronger dollar makes gold more expensive for holders of foreign currency while a rise in U.S. rates, lift the opportunity cost of holding non-yielding assets such as bullion.
Meanwhile, geopolitical uncertainty eased, reducing demand for safe-haven gold as investors downplayed U.S-North Korea tensions and piled into risker assets such as equities.
“Investors have been programmed to more or less ignore stuff with Korea. The last two or three times this kind of thing occurred we went down a little, only to turn back higher. We’ve learned to buy on the dips,” said Terry Morris, senior vice president and senior equity manager for National Penn Investors Trust Company.
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