Gold edged lower in the early morning Asian session ahead of the FOMC’s two-day meeting starting later Tuesday.
Gold is a tricky trade for now and could be subject to further profit-taking as market participants try to get a better handle on how high the Fed will raise rates this year, Oanda says.
Selling of the precious metal might target the $1,930/oz level, but that should be a level where buyers emerge, Oanda adds.
GOLD APPEAL LESSENED AS WAR IN UKRAINE DRAGS ON
Spot gold is 0.3% lower at $1,947.80/oz.
The Ukraine crisis is turbocharging a dash for haven investments around the globe.
The Russian invasion and the ensuing jump in commodities prices have sent investors barreling into gold and government bonds and scooping up bets that will pay out if they keep rising.
The turbulence has unleashed a frenzy of trading tied to one of the biggest exchange-traded funds tracking gold, while investors have also poured money into government bonds, stemming a flood of withdrawals from earlier in the year.
GASOLINE’S RECORD RUN BREAKS
The WSJ Dollar Index, which measures the greenback against a basket of 16 other currencies, closed Monday at its highest level since June 2020. The dollar is seen as a haven because of its status as the world’s reserve currency.
Many traders have flocked to options on one of the biggest exchange-traded funds tracking gold, sending activity to the highest level since February 2020 while bullish trades in particular have skyrocketed, Cboe Global Markets data show. Activity in calls, which give the right to buy shares at a specific price by a stated date, hit the highest level on record last week. Investors have also poured money into the iShares 20+ Year Treasury Bond ETF, giving the fund four consecutive weeks of inflows after significant outflows to start the year.
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Investors had shunned some of these trades in recent months. Gold prices edged lower last year and started 2022 with declines before soaring in February and continuing their ascent this month. Treasury yields had risen in recent months as investors positioned for the Fed to lift interest rates. Recently, they have recorded some of their sharpest falls of the past two years.
– The Wall Street Journal contributed to this report.