Gold, SPDR Gold Trust (ETF) (NYSEARCA:GLD) Up As Fed Looks Divided

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Prices of gold and SPDR Gold Trust (ETF) (NYSEARCA:GLD) rose in Asia and the gains could be seen continuing though noncommittally in early morning trading in Europe on Tuesday.

Prices of gold futures for December delivery advanced 0.74% to close at $1,335.45 a troy ounce in Asian hours. Gold prices were seen rising 0.52% in early trading in Europe after earlier hitting a session high of $1,335.85.

A divided Fed spurs interest in gold

The Federal Reserve policy officials have been sending mixed signals as they often do regarding the review of short-term lending rates. While some believe that the economy has recovered enough to withstand higher borrowing costs, others are warning that a premature hike in interest rates could burden the economy at this point.

The Atlanta Federal Reserve Bank President Dennis Lockhart made a statement Monday that seemed to suggest that the economy was ripe for a near-term rate hike. He talked about recent economic data justifying a serious discussion on moving interest rates.

However, Federal Reserve Governor Lael Brainard, also speaking on Monday, seemed to contradict Mr. Lockhart’s position. Ms. Brainard is of the opinion that the prevailing economic circumstances, especially the disappointing August labor report, do not support a swift move to increase rates.

The Fed will be holding its next policy meeting from Sept. 20 to Sept. 21. Though Fed Chair Janet Yellen had hinted at an annual symposium of the central bank that the case for a rate hike had strengthened, recent comments by other Fed policy officials show that the central bank is heading into the next policy meeting as a divided house.

“[The comments by Brainard] could send gold back to the top of its recent trading range. [Gold bulls] may want to play this to the upside a bit,” said Bart Melek of TD Securities.

Because gold is sensitive to rate movements, a gradual path to a rate hike favors trading in the yellow metal while a swift series of increases hurts the price of bullion.

The currency market

The dollar seemed to shrug off the mixed signals being sent by Fed officials, thus gaining ground against several rivals. EURUSD was down 0.05%, while USDJPY was seen up 0.07%. AUDUSD eased 0.54% as NZDUSD retreated 0.42%.

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