Gold clung to small overnight gains on Wednesday, supported by softness in the dollar, but the metal’s upside was limited as investors anticipated a Federal Reserve rate hike next week.
Spot gold was little changed at $1,075.20 an ounce by 0042 GMT, after rising 0.4 percent on Tuesday as the dollar slid against a basket of major currencies. The metal is less than $30 away from a near-six-year low reached last week.
Bullion traders are not optimistic of a sustained rally in prices as the Fed is widely expected to raise U.S. rates for the first time in nearly a decade at its next policy meet on Dec. 15-16. Higher rates are expected to dent demand for non-interest-paying gold, which has already lost 9 percent of its value this year in anticipation of the rate hike.
Investors are boosting bets gold will soon drop to $1,000 an ounce, options data show, ahead of next week’s Fed meeting.
A slide in commodity prices, particularly crude oil, is also weighing on gold. Crude has fallen to its lowest in nearly seven years as OPEC continues to pump near-record amounts of oil to defend market share.
Weakness in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation.
In the physical markets, a bullion association in India is planning to launch the country’s first physical gold trading exchange, in an attempt to bring transparency to the market for the precious metal in the world’s second biggest consumer.
Stock markets worldwide slipped on Tuesday, weighed down by weak China trade figures.
The currencies of major commodity producers such as Australia and Canada nursed hefty losses early on Wednesday after suffering big falls in the past two days from a selloff in oil and bulk commodities.