Gold Trading Remains Volatile

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Prices of gold and premarket trading for the corresponding SPDR Gold Trust (ETF) (NYSEARCA:GLD) were seen trading slightly higher on Tuesday morning. But trading in the yellow metal opened lower in Europe after closing in the red in Asian trading.

At about 08:15GMT, gold contracts for December delivery were up about 0.14% to trade at $1,329.00 a troy ounce.

In Asian hours, gold for December delivery declined 0.20% to trade at $1,324.70 a troy ounce. Gold prices closed in the red a day earlier as well.

Cautious trading in gold

The up and down movement in gold prices can perhaps be explained by investor caution ahead of major policy events. Federal Reserve officials are scheduled to meet later today and while they are not expected to immediately raise interest rates, the meeting is expected to provide a hint about the path to an interest rate review this year.

Expectations that the Fed will raise interest rates at least once in 2016 have increased following a string of bullish U.S. economic data for the month of June. For instance, it turned out that non-farm hiring last month was stronger than economists have expected. Retail and housing sectors also produced encouraging data.

Those growing expectations of at least one interest rate hike this year have strengthened the dollar, with the greenback recently climbing to a multi-month high against a basket of rival currencies. But a stronger dollar ends up making gold more expensive for investors holding currencies other than the dollar.

Meeting of BOJ officials

Besides the Fed meeting, policy officials of Bank of Japan are also expected to meet later this week at which fresh easing measures are expected to be announced. But the BOJ could still delay rolling out additional easing measures until next month when the government is also expected to announce fiscal stimulus measures to spur domestic growth.

Investors are not sure what to expect as the Fed and BOJ officials meet this, which explains the volatility in gold prices.

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