Prices for gold and the corresponding SPDR Gold Trust (ETF) (NYSEARCA:GLD) were mostly steady in Asia and were up to a multi-week high in early European trading on Wednesday. Gold trading in Asia and Europe could be seen rattled by a combination of profit-taking and diminishing hopes of a near-term rate hike by the Federal Reserve. What is fueling the diminishing hopes is an open question.
Gold futures for December delivery were changing hands in the vicinity of $1,353.75 a troy ounce, not far from the nearly three-week high of $1,354 reached in overnight trading in North America.
In Europe, gold futures had already hit a session high of $1,357.60 in early trading and were last seen at $1,352.85 or down 0.08%.
Some investors could been booking profits following recent rallies in the price of the yellow metal after a string of mixed economic data from the U.S. that have also had a negative hit on the dollar.
Downbeat U.S. economic data
Expectations of a near-term rate hike have weakened following the release of downbeat employment and manufacturing data, though it is unclear if these data are what caused expectations to fall. Service sector data also disappointed, which may have also played a roll in denting hopes of a swift move towards a rate increase by the Fed. The U.S. service sector index for August sank to its lowest level last seen more than six years ago.
Diminishing prospects of a near-term rate hike is lifting gold prices as traders buy or hold on tightly to safe-haven assets in their possession. Some experts see gold prices holding firmly over the coming weeks.
“[The gold market] is likely to remain firm for the next few weeks. [However] the market does believe that rate rises are coming eventually, and that there will be price resistance as we move higher,” said James Steel of HSBC.
A weaker dollar
The downbeat economic data coming out of the U.S. have also weakened the dollar, thus making gold more affordable to foreign investors.
The U.S. dollar index was up marginally to 94.89 in early trading in Europe on Wednesday. USDJPY was down 0.37%, while USDCAD was down 0.05%. AUDUSD was down 0.31% and NZDUSD was up 0.43%.