Gold and SPDR Gold Trust (ETF) (NYSEARCA:GLD) continue to decline as investors find few incentives to purchase the yellow metal ahead of key monetary policy meetings. The Federal Reserve officials are set to meet today to discuss possible path to U.S. interest rate review.
Investors have grown optimistic in the recent weeks that the Fed will raise interest rate before the end of this year.
Gold prices are known to be sensitive to higher interest rates. When interest rates go up, investors have greater incentives to go for yield-bearing assets such as stocks and bonds as they give safe-haven assets such as gold a wide berth.
Growing optimism about strengthening U.S. economy given a string of upbeat economic data released recently has also helped to lift the dollar. But a stronger dollar also makes gold more expensive for traders holding currencies other than the greenback.
Trading in gold in Europe and Asia
During morning hours of European trading, prices of gold futures for December delivery could be seen trending down 0.14%.
Earlier on during Asian trading, gold for December delivery declined 0.24% to trade at $1,325.15 a troy ounce.
But gold prices have risen nearly 25% so far in 2016, after rising to a historic 30-day high in the first quarter. Mixed U.S. economic data and uncertainty over Brexit vote played a role in the sharp spike in gold prices early this year. But investor sentiment has improved in the recent years, especially after the U.K.’s Conservative Party moved quickly to put its house in order by choosing Teresa May to replace David Cameron as the prime minister after the stunning Brexit vote outcome.
Recent comments by some European Union officials to the effect that the region’s economy stood strongly against the Brexit wave have also lifted investor sentiment and triggered appetite for riskier assets investment.
Other precious metals
Silver futures for September delivery fell 0.22 and copper contracts for September delivery gained 0.45% in Asian hours.
Investors will be keeping a close eye on the meeting of Bank of Japan policy officials later this week after the Fed meeting.