An employee of the ProAurum gold house decorates what is said to be Europe’s most expensive Christmas tree, made of 2,018 Vienna philharmonic gold coins, valued at €2.3m in Munich, Germany, on December 3 2018. Picture: REUTERS/MICHAEL DALDER
An employee of the ProAurum gold house decorates what is said to be Europe’s most expensive Christmas tree, made of 2,018 Vienna philharmonic gold coins, valued at €2.3m in Munich, Germany, on December 3 2018. Picture: REUTERS/MICHAEL DALDER

Bengaluru — Gold fell on Thursday as stock markets gained for a third consecutive day, but the metal held in a tight $6 range ahead of next week’s US Federal Reserve federal open market committee (FOMC) meeting, when the US central bank is widely expected to raise interest rates.

Meanwhile, palladium touched a record high, trading at a premium to bullion, buoyed by a sustained deficit and hopes of fresh demand from the vehicle sector.

Spot gold eased 0.3% to $1,241.50/oz at 10.56am GMT, while US gold futures were down 0.3% at $1,245.80/oz.

“Next week we have the FOMC rate decision, and it has been pretty much priced in that we are going to have a rise. But if we see the Fed hold off that rate hike in the light of rising inflation and other macroeconomic concerns, gold could be boosted by that,” Mitsubishi analyst Jonathan Butler said.

Investors’ focus would be on how much further the US Federal Reserve might lift rates in 2019.

“We would have a bit more guidance on that next week when the FOMC meets. But it does seem that the Fed is adjusting from more aggressive rate hikes, three or more, to a somewhat toned down approach,” Butler said.

Higher rates make nonyielding bullion less attractive, and tend to boost the dollar, in which gold is priced, making it more expensive for holders of other currencies.

Meanwhile, equity markets rallied on signs of easing trade tensions between the US and China.

“With equities rebounding this week, gold has fallen slightly out of favour as traders unwound their safe-haven bets,” said Fawad Razaqzada, an analyst with Forex.com.

Gold’s direction in the near term would be determined by moves in the greenback, which could be pressured if the Fed takes a more cautious approach, analysts said.

“Gold’s recent breakout above the $1,240 resistance means the path of least resistance is still to the upside and it should get a lift if the dollar were to fall on the back of a dovish Fed,” Razaqzada said.

The European Central Bank’s (ECB) interest rate decision is also on investors’ radar, with the bank set to announce formally an end to its vast quantitative easing programme at a policy meeting later on Thursday.

Among other precious metals, silver was down 0.3% at $14.69/oz.

Spot palladium was steady at $1,261.10/oz, having touched a record high of $1,269.25 earlier in the session.

The autocatalyst metal rose strongly on news that China would be reducing tariffs on US imported vehicles, raising hopes that the sector would be boosted by additional demand, analysts at ANZ said in a note.

Platinum gained 0.1% to $798.90.

Reuters