Gold futures succumbed to modest losses in the domestic market on Tuesday as investors and speculators remained jittery amidst heightened uncertainty over the outcome of the Federal Reserve’s policy meeting next week, with a recent global market rout amid a worsening slowdown in China complicating the task of the world’s top central bank as it prepares to decide when to lift interest rates for the first time since 2006.
Even as recent US economic data has been a mixed bag, a commodity collapse may keep inflation well below the Fed’s goal for a prolonged period, while a China induced global stock mayhem has dampened sentiment worldwide, making it difficult for traders to predict when initial rate tightening will happen.
A rebound in global equities also dimmed the safe haven appeal for the yellow metal. Each of the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 rallied by over 2 per cent as China’s stocks rose nearly 3 per cent, a sign that the country’s steep stock rout may have ended.
A weaker greenback boosted the demand for Gold as an alternative asset, trimming losses in the bullion. Weaker dollar makes Gold cheaper for those holding other currencies, thus bolstering demand.
Tepid China trade data which showed that exports and imports sank last month bolstered the case for further monetary easing to revive the sagging world’s second biggest economy, lifting the appeal of gold, a hedge against the inflationary risk of monetary stimulus.
Gold may remain stuck in low gear as traders stick to the sidelines ahead of the FOMC meet next week.
At the MCX, Gold futures for October 2015 contract closed at Rs 26,424 per 10 gram, down by 0.29 per cent after opening at Rs 26,499, against the previous closing price of Rs 26, 500. It touched the intra-day low of Rs 26,386.
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