Gold edges down on caution ahead of key central bank meetings

Gold inched lower on Monday as investors remained cautious ahead of policy meetings of three major central banks and the naming of the next U.S. Federal Reserve chair.

The market is awaiting cues from the meetings of the Federal Open Market Committee (FOMC) and central banks of England and Japan.

U.S President Donald Trump is also expected to announce the next head of the Federal Reserve, amid speculations that governor Jerome Powell could be the favored candidate.

Spot gold dipped 0.1 percent, to $1,271.50 per ounce at 0408 GMT. U.S. gold futures for December delivery rose 0.1 percent, to $1,272.4.

“The week is very data heavy, with many tier 1 central bank decisions, PMI’s and other data culminating in Friday’s non-farm payrolls,” said Jeffrey Halley, a senior market analyst with OANDA.

“With a dovish ECB and Bank of Canada followed by impressive U.S. GDP data last week, we would expect the dollar to remain on the front foot and gold to struggle,” he added.

Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold prices by increasing the opportunity cost of holding non-yielding bullion.

“The developed economies are hinting at a more hawkish stance. For the rest of this week,market watchers will watch out for the rhetoric given by the FOMC, Bank of England and the Bank of Japan,” OCBC analyst Barnabas Gan said.