Gold prices ended lower Monday, stretching their streak of declines to a fourth session as this week’s focus now turns squarely on the Federal Reserve.
Palladium futures, meanwhile, marked their highest finish since September of 2014, buoyed by tight supplies.
August gold GCQ7, -0.21% fell $2.50, or 0.2%, at $1,268.90 an ounce. The settlement handed the contract its fourth-straight drop, the longest string of losses since the nine-session period ended March 10, according to FactSet data.
The Fed’s two-day meeting will wrap up Wednesday, where a dollar-supportive rate increase is widely expected, but not guaranteed.
Wall Street is pricing in a 95.8% chance of a lift to U.S. benchmark rates, which would follow the European Central Bank’s decision last Thursday to keep its rates steady.
Higher interest rates are typically a negative for gold, because it enhances the appeal of yield-bearing assets; gold doesn’t offer a yield.
Brien Lundin, editor of Gold Newsletter, however, said he believes the Fed meeting will be positive for gold regardless of what happens.
“If the Fed raises rates as expected, it will alleviate some short-selling pressure on the metal as traders exit those positions on the news,” he said. “And if for some reason the Fed decides not to raise, it would be a significant dovish signal that would send gold even higher.”
Meanwhile, the “surprising U.K. election results do not seem to be doing much for gold…as the thinking is that Brexit negotiations will now move towards a ‘softer exit’ (more bearish for gold) as opposed to the ‘hard exit’ that markets have been associating with Prime Minister May’s previous government,” Edward Meir, an independent commodity consultant at INTL FCStone, said in a recent note.
The U.K. general election ended Friday in a hung parliament, where no single party holds a majority.
Meanwhile, the dollar, as measured by the ICE U.S. Dollar Index DXY, +0.08% traded nearly flat Monday after posting a gain for last week. A stronger dollar can provide a headwind for gold, and other commodities priced in the currency, making it more expensive to buyers using other monetary units.
Among other major metals Monday, prices for palladium climbed, marked their 11th gain in 12 sessions.
September palladium PAU7, +1.13% added $8.05, or 0.9%, to settle at $864.25 an ounce. That was the highest finish for a most-active contract since early September of 2014, according to FactSet data.
“We are seeing a combination of technicals and fundamentals” supporting palladium, Bill Baruch, chief market strategist at iiTRADER, told MarketWatch.
“The contract is in a deep backwardation as the front month contract is well above the back months [and] supply in the near term is very tight,” he said. “Furthermore, a rising trend line from March was taken out on Friday and has encouraged a short squeeze on a technical basis.”
Elsewhere in the metals complex, July platinum PLN7, -0.04% rose $4.20, or 0.5%, to $944.50 an ounce. July silver SIN7, -0.32% gave up 27.9 cents, or 1.6%, to $16.944 an ounce, while July copper HGN7, +0.21% lost 3.4 cents, or 1.3%, to $2.616 a pound.