Gold price holds steady ahead of Fed meeting

Gold price steady around $2,000 as Fed to announce interest rate decision on Wednesday 

The price of gold remained steady above the $1,990 per ounce mark on Tuesday, as investors adopted a cautious approach in anticipation of upcoming monetary policy meetings by major central banks scheduled for this week.  

The U.S. Federal Reserve will announce its interest rate decision on interest rates on Wednesday, with the Bank of England set to follow suit on Thursday. Expectations are that both central banks will maintain the status quo on interest rates, carefully balancing their strategies to combat inflation against the increasing risk of a recession. 

In the meantime, the Bank of Japan stuck to its ultra-loose monetary policies on Tuesday, maintaining its -0.1% target for short-term interest rates. However, it introduced further refinements to its yield curve control policy by expanding the target range for the 10-year Japanese Government Bond (JGB) yield to between +/- 1%. In his morning notes on Tuesday, Markets.com Chief Market Analyst Neil Wilson commented that the Bank of Japan’s strategy was “interesting”: 

“The BoJ redefined the 1% cap as a loose “upper bound” rather than an absolute cap. Its strategy is interesting. The BoJ had raised the ceiling from 0.5% to 1% in July and markets have been waiting for the next move.” 

Despite these developments, gold is still on course to achieve a nearly 8% increase in value during the month of October, mostly on the back of the Israel-Hamas war and heightened geopolitical tensions in the Middle East, which have amplified the demand for gold as a safe-haven asset. 

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Demand for gold: Central bank purchases reach record levels, according to WGC 

Global central banks have made record-breaking purchases of gold during the first nine months of this year, according to a report from the World Gold Council (WGC) released on Tuesday. 

“In the current, macroeconomic and uncertain geopolitical context, central banks have turned to gold for its return characteristics, liquidity and safety,” Joe Cavatoni, market strategist for the Americas at the WGC, told MarketWatch correspondent Myra Saefong. 

Central banks' demand for gold throughout the first three quarters in 2023 surged 14% when compared to the same period in the previous year. The increase has propelled total gold purchases by central banks to a historic 800,000 metric tons, marking the highest level ever for the nine-month period, as reported by the World Gold Council. 

“With central-bank demand resuming its voracious pace after a slower Q2, we expect the annual total to approach last year’s record,” the report said. There’s also “an outside possibility it will exceed that figure.” 

Gold price forecast: Yellow metal builds base for further gains, analysts say 

In its precious metals appraisal from October 30, German technology firm Heraeus said the yellow metal could face more price consolidation in the near term: 

“The gold price has been consolidating below $2,000/oz after its sharp rally. Gold is overbought and the price has reached an area of resistance around $1,980/oz, so further consolidation is possible in the near term. Safe-haven buying has helped the gold price to hold up despite the scale of the ongoing rally in bond yields. If yields start to drop, that could also help to lift the price”. 

Daniel Hynes, a Senior Commodities Strategist at Melbourne-based ANZ, issued a similar opinion to Heraeus, saying the gold price was consolidating and would likely show further gains: 

“Israel’s limited ground offensive in Gaza also saw haven demand soften. Gold had pushed above USD2,000/oz on Friday, but it wasn’t able to hold those gains Monday. Nevertheless, gold does appear to be consolidating and building a base for further gains.” 

At the time of writing on Tuesday, the front-month gold contract on the NYMEX traded around the $2,001 mark, as per MarketWatch data. 

When considering gold and other commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.