Investing.com -- Gold futures rebounded from a massive sell-off one session earlier amid a sharply weaker dollar, as investors wrestled with the continued uncertainty related to a potential interest rate hike by the Federal Reserve next week.
On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a tight range between $1,102.80 and $1,113.90 an ounce, before settling at $1,109.80 up 7.90 or 0.72%. After touching down to multi-year lows in late-July below $1,080 an ounce, gold is up by more than 2% over the last six weeks. The precious metal has still closed lower in 12 of the last 16 sessions as next week's highly-anticipated Federal Open Market Committee meeting nears.
Gold likely gained support at $1,102.10, the low from Sept. 9 and was met with resistance at $1,140.40, the high from Sept. 2.
On Thursday morning, weak import data last month from the U.S. Department of Labor's Bureau of Labor Statistics (BLS) appeased dovish sentiments at the Fed for a delayed rate hike. U.S. import prices fell by 1.8% in August, the BLS said in a monthly report, extending previous losses of 0.9% in July. On a year-over-year basis, imported inflation has fallen by 11.4% -- its lowest amount since September, 2009.
The FOMC is keeping a close eye on temporary headwinds restraining inflation as it decides whether to raise its benchmark Federal Funds Rate at next week's two-day meeting, which concludes on Thursday. Nearly a decade has passed since the FOMC has lifted the rate, which banks use to lend to other institutions on overnight loans. The Fed Funds Rate has remained at its current level between zero and 0.25% since December, 2008.
Gold, which is not attached to dividends or interest rates, struggles to compete with high-yield bearing assets in periods of rising rates.
Many investors worry that an imminent rate hike will place undue downward pressure on long-term inflation, which has remained under the Fed's targeted goal of 2% for every month over the last three years. In June, the Fed's Survey of Economic Projections forecasted that Core PCE inflation will rise to a level between 1.6 and 1.9% in 2016 from its current level of 1.2%. By the end of 2017, analysts expect core inflation to reach between 1.9 and 2.0%, according to the survey.
Last month at a symposium in Wyoming, however, Fed vice chair Stanley Fischer emphasized that the Fed should not wait until inflation moves back up to 2% to begin raising short-term rates. In addition, Fischer told CNBC that recent economic data had been impressive, providing a compelling argument for short-term rates to head in a higher direction.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell sharply to an intraday low of 95.55, its lowest level in more than a week. In U.S. afternoon trading, the index stood at 95.58, down 0.40% on the session.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for December delivery gained 0.079 or 0.54% to 14.655 an ounce.
Copper for December delivery rose 0.010 or 0.42% to 2.447 a pound.