Gold moved higher on the first trading day of the week after a significant fall in the last session on Friday.
“Gold investors will be much more cautious being caught long above $1,800 now, even if the dollar retraces and gold prices rise,” said Jeffrey Halley, senior market analyst, Asia Pacific, OANDA.
U.S. gold futures gained 0.38% to trade at $1,790.7 as of 8:34 AM EDT.
Friday’s data release showed that the jury is still holding on to the Fed’s view that the inflation is temporary, given the fact that the Personal Spending and the Personal Consumption Expenditures – Price Index, both increased in the month of October.
On the other hand, OANDA’s Halley claimed that the Fed was unlikely to be more hawkish than previously indicated.
“Though they might raise the amount of monthly taper targets, they will likely quite strongly say that no interest rate hikes are imminent. But none of this will be good news for gold as this should still drive the dollar and yields higher,” Halley said.
Wednesday marks the conclusion of the Fed‘s policy meeting.
The yellow metal is traditionally seen as a hedge against inflation.
But, the increase in the interest rates coupled with reduced stimulus causing the government bond yields to move upwards, increases the opportunity cost of holding the metal.
The dollar index touched 94.00 on Friday, causing the metal to suffer against the USD.