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Gold Prices Stay Flat Ahead of Fed Summer Retreat

August 23, 2016 at 17:26 by Andrew Moran

Traders are perhaps taking a wait-and-see approach to gold. Later this week, officials from the Federal Reserve will gather in Wyoming for the US central bank’s annual summer retreat. In the Cowboy State, Fed Chair Janet Yellen is expected to deliver remarks that may offer clues as to what she will do with interest rates.

Gold futures stayed relatively flat on Tuesday. December gold futures rose just $0.40, or 0.03%, to $1,343.80 per ounce at 16:56 GMT. Gold has been on the decline since topping the important $1,350 threshold last week as investors are waiting to make a move after Yellen’s speech on Friday.

Silver prices are also flat. September silver futures climbed just $0.05, or 0.27%, to $18.91 an ounce. Silver has not traded this low since mid-July.

Investors applied some pressure on gold on Tuesday. With stocks surging, traders decided to move away from safe haven assets and into riskier bets.

Precious metals have been benefiting this year from the Fed’s very slow approach to raising rates. Analysts are hoping that the summer retreat, which will include talks on gross domestic policy and consumer sentiment, will provide some hints pertaining to a potential rate hike this year or in 2017.

Overall, the market does not expect a rate hike until December or early next year. New economic data released over the past couple of days could provide the Fed with ammunition for a rate hike. New US home sales spiked 12% in July to a nine-year high, while manufacturing activity rose this month.

Dollar-denominated metals become less attractive in a rising-rate environment. Because gold and silver do not offer investors any yield, traders will tend to park their money in riskier opportunities, like oil and stocks.

Year-to-date, gold prices have increased more than 20% and silver has jumped 40%.

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