Gold prices rose in early Wednesday trading, reclaiming ground above the $4,000 level. The precious metal had been under pressure, at one point shedding around 12% relative to the all-time high reached last week, due to an improvement in risk appetite in financial markets that diverted flows away from the safe-haven gold. This shift was driven by rising hopes that the US and China will avert an all-out trade war, following the agreement on a framework for the arrangement. However, the corrective movement appears to have run out of steam, as traders focus on the Federal Reserve’s monetary policy meeting concluding today. It is widely expected that the central bank will confirm a 25-basis-point rate cut and maintain a dovish stance in its policy statement and forward guidance. Against this backdrop, and with another rate cut expected at the December meeting, the US dollar may lose strength if these expectations are confirmed — a development that would benefit gold due to the inverse price correlation between the two assets. The precious metal is also supported by ongoing geopolitical turbulence, particularly the apparent deterioration in Russian-American relations. Nevertheless, the upside for bullion is likely to remain capped by trade-related optimism.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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