Gold prices edged lower Monday following a three-day decline as strong global data and rising stock markets offset the metal`s safe-haven appeal.
Global stock markets rose today as risk sentiment improved following the positive economic data released by major economies around the world – especially the U.S. economy – last week, easing concerns about global economic growth.
Traders will be looking to the Federal Open Market Committee (FOMC) meeting on Tuesday. Meanwhile, the direction of gold prices is facing two scenarios amid varied expectations regarding completing the stimulus program:
1- The Federal Reserve would be taking the last step to withdraw the remaining stimulus programs at the rate of $15 billion, ending a long journey of supporting the economy.
2- The Fed would postpone terminating stimulus programs due to the weak global economy signals.
Both scenarios has its own impact; if the first scenario applied, gold will retreat and the schedule of U.S. monetary policy will proceed according to what the Feds previously said, which emphasizes the strength of the U.S. economy.
The second scenario will support the metal due to growing concerns about the global economy, and this scenario will confirm that the U.S. economy has not fully recovered in order to end the stimulus programs, which will lead the Fed to adjust its schedule.
The Fed confirmed earlier this year that it will end stimulus programs at the FOMC meeting in October, and gradually raise record-low interest rates starting from the middle of next year 2015.