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Gold ticks up in range-bound trade, as investors await key Fed decision

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Investing.com -

Investing.com -- Gold futures inched up in range-bound trade on Friday, as investors continued to brace for a likely interest rate hike by the Federal Reserve at next week's highly anticipated meeting.

On the Comex division of the New York Mercantile Exchange, gold for February delivery traded between $1,061.90 and $1,078.50 an ounce before settling at $1,075.20, up 3.30 or 0.31% on the session. Gold hardly fluctuated at all over the week, as traders remained cautious ahead of the critical decision by the Federal Open Market Committee. After surging by more than $15 an ounce last Friday, gold failed to close by more than 0.75% in a positive or negative direction in any of the five sessions on the week. The precious metal remains near last week's six-year low when it slipped below $1,050 an ounce, erasing all of its gains from the previous three months.

Gold likely gained support at $1,046.20, the low from Dec. 3 and was met with resistance at $1,114.20, the high from Nov. 3.

At next week's closely watched two-day meeting, the FOMC is expected to lift the target range on its benchmark Federal Funds Rate by 25 basis points to 0.25-0.50%. The Fed Funds Rate, the rate which institutions offer on interbank loans at the Federal Reserve Bank of New York, has remained at near-zero levels for nearly seven years since December, 2008. Almost a decade has passed since the Fed last raised the rate at a meeting in June, 2006.

On Friday, the CME Group's (O:CME) FedWatch placed the probability of a quarter-point hike on Dec. 16 at 81.4%, up from a level which hovered in the 70s before last week's relatively optimistic U.S. jobs report. The U.S. economy added 211,000 nonfarm payrolls in November, while the unemployment rate remained unchanged at 5.0%. For the year, the labor market has averaged job gains of at least 200,000 a month, far above the 100,000 threshold set by Fed chair Janet Yellen for the next year.

Yellen has continually downplayed the significance of lift-off, placing more importance on the gradual path of rate increases as the Fed normalizes monetary policy. Earlier this week, the Wall Street Journal reported that FOMC members may struggle to form a consensus on the language in Wednesday's statement regarding the pace of tightening. In September, the FOMC projected that the Fed Funds Rate would reach 1.4% in 2016 and 2.6% in 2017, according to its median forecasts.

An upward move by the Fed is viewed as bearish for gold, which struggles to compete with high-yield bearing assets.

Elsewhere, the U.S. Department of Commerce said Core Retail Sales in November increased by 0.6%, following a 0.2% increase a month earlier. The core figure strips out volatile categories such as gasoline, automobile and food sales. Separately, the Labor Department said its Producer Price Index increased by 0.3% in November, following a 0.4% decline a month earlier. The data could provide the retail industry with momentum for the final weeks of the Holiday season.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell by more than 0.30% to an intraday low of 97.32. Since reaching a 12-month high at 100.60 last week, the index is down by roughly 2.5%.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for March delivery plunged 0.195 or 1.38% to $13.90 an ounce.

Copper for March delivery gained 0.043 or 2.09% to 2.116 a pound.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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