Gold started the week in a thin trade on Monday, slipping slightly lower as the dollar firmed up ahead of key economic data and the Federal Reserve's policy meeting later this week.
The yellow metal saw a choppy movement earlier in Asia, after marking its second straight weekly drop on Friday on strong US economic data. However, the metal drew support above $1,300 an ounce with the simmering tensions between West and Russia, and violence in the Middle East, even after Palestinian militant group Hamas announced a new 24-hour ceasefire with Israel.
Spot Gold was down at $1,304.55 an ounce from the an intraday high of $1,309.07, compared with the day’s open at $1,305.30.
The Federal Open Market Committee (FOMC) will announce the rate decision for July, with expectations to keep the benchmark interest rate at a record-low 0.25%, as well as the completion of the Federal withdrawals for the quantitative easing policy, bringing down the program to $35 billion $25 billion.
The QE3 program will be reduced by buying government bonds to 15 billion dollars from 20 billion, with a reduction of real estate-backed bond program to $10 billion from $15 billion. The Fed is expected to continue withdrawals until October 2014 amid growing expectations that the US central bank will hike the interest rates earlier than expected.
The US jobs report, due to be released Friday, is expected to indicate more evidence on the health of the US labor market, which has recently witnessed a remarkable development after a very low unemployment rate, expected to stay at 6.1% in July, while the consensus are calling for 225-thousand gain in non-farm payrolls this month, from the previous increase of 288 thousand.
The strength of the Dollar was drawn from the outlook for the central Bank's monetary policy, while traders continue to look for more signs of improvement in the world's largest economy.
The USDIX, which tracks the performance of the greenback against a six-currency basket, was hovering near a six-month high around 81.12 early today, as traders brace for the Fed's policy outcome and key data later in the week.
Data on the new home side of the housing sector have been very disappointing. Today's pending home sales report will offer an advance indication for existing home sales, which have been the stronger side of the sector.
However, the consensus called for a very anemic figure in the June report, compared to last month's strong gain. The forecast came as follows:
- Pending Home Sales (MoM)(JUN) 0.5% vs. 6.1%a