By Barani Krishnan
Investing.com - Gold continued its slump Tuesday, hitting near one-month lows below $1,500, as longs in the yellow metal wait to see if the European Central Bank proceeds with a rate cut that would be friendly to the safe haven.
Spot gold, reflective of trades in bullion, was at $1,492.69 per ounce by 1:50 PM ET (17:50 GMT), down $6.28, or 0.4%, on the day. The session low was $1,486.59, a trough since August 13.
Gold futures for December delivery settled down $11.90, or 0.8% at $1,499.20 per ounce on the Comex division of the New York Mercantile Exchange. The December contract’s session low of 1,494.45 also marked a bottom since August 13.
“Given the skewed positioning and recent break of the $1,500/oz level, we would not be surprised to see the yellow metal trend toward $1,480 or slightly lower from here,” TD Securities said in a note.
“The recent moves in risk markets have seen traders pare back their expectations of Fed rate cuts, which suggests that any additional downside from here should be temporary and represent a buying opportunity given the underlying economic weakness and dovish central bank tilt still remains.”
Investors in gold and across markets will be looking out for the ECB’s monthly meeting on Thursday, where a rate reduction has been forecast as part of a broader package to stimulate the eurozone economy.
Eurozone rates have been held near zero in recent years in an attempt to stimulate growth and ECB chief Mario Draghi is expected to keep them low for longer to counter a weak manufacturing sector, uncertainty surrounding Brexit and the ongoing global trade war.
If the ECB does implement a rate cut, it might be a strong motivator for the Federal Reserve to follow through with a 25-basis-point decrease when it meets Sept. 17-18. If so, it would be the second time since July that the Fed has cut rates by 25 bps.
Lower rates are positive for gold prices.