Gold firms above 3-week low

Gold held above a three-week low on Wednesday as the dollar nursed losses, but the prices remained range-bound as traders waited for direction from the Federal Reserve on the timing of a US interest rate hike.

Spot gold had edged up 0.2 per cent to $1,124 an ounce by 0321 GMT, above a three-week low of $1,116.20 reached earlier in the week.

The metal snapped a four-day losing streak on Tuesday, buoyed by a softer dollar.

Fed rate hike

With Friday’s US payrolls data failing to provide clarity on the timing of the Fed’s first interest rate hike in nearly a decade, markets are now eyeing the US central bank’s next policy meeting on September 16-17 for clues.

“Gold looks likely to trade a relatively tight range prior to the FOMC meeting next week,’’ said James Gardiner, a precious metals trader at MKS Group, referring to the Federal Open Market Committee.

The $1,116 level is a key level of support on the downside, while resistance is at $1,126-27, Gardiner said.

The prospect of higher rates, which would lift the opportunity cost of holding non-yielding bullion while boosting the dollar, has weighed on gold prices this year. A decision to not raise rates at the September meeting may support prices, said HSBC analyst James Steel.

Global turmoil

The Fed should hold off on raising interest rates until the global economy is more stable, the World Bank’s chief economist said in an interview with the Financial Times published on Tuesday.

“The world economy is looking so troubled that if the US goes in for a very quick move in the middle of this I feel it is going to affect countries quite badly,’’ Kaushik Basu was quoted as saying.

Gold has failed to attract strong investor interest as a safe haven despite the recent weakness in stocks due to worries over the Chinese economy, showing that the metal is struggling to find direction outside US monetary policy, analysts say.

The physical gold market has been mixed, providing little support to global prices.

Gold prices in India are at a discount to the global benchmark for the first time since mid July as a weak monsoon dampened demand in the world’s second-biggest consumer.

In top consumer China, premiums edged up on the Shanghai Gold Exchange to about $5 an ounce on Wednesday morning, up from last week’s $4.