Gold advances as investors wait for clues from central bankers

[SINGAPORE] Gold rose for a second day before meetings of the Federal Reserve and Bank of Japan next week, which should shed further light on monetary policy.

Bullion for immediate delivery advanced 0.2 per cent to US$1,325.27 an ounce at 10:02am in Singapore, according to Bloomberg generic pricing.

The metal touched US$1,314.24 on Wednesday, the lowest intraday level since Sept 2, before recovering to close 0.3 per cent higher.

Gold's rally this year has stalled on uncertainty over whether the Fed will raise US borrowing costs, which would make gold less competitive against interest-bearing assets.

On Monday, Fed Governor Lael Brainard said there is no reason to rush to raise rates, while on Sept 9, Boston Fed President Eric Rosengren said that the economy may overheat if the bank waits too long. Economists are divided over what the BOJ will do at the end of its policy meeting on Sept 21.

"Next week's Fed and BOJ meetings hold special importance, as September was eyed as the month where monetary policy action will ignite," Bernard Aw, a Singapore-based strategist at IG Asia Pte Ltd, said by e-mail.

"But as things stand, I am not expecting both central banks to tweak policy levers."

Odds on a hike at the Federal Open Market Committee's policy-setting meeting on Sept 20-21 are down two points from a week ago to 20 per cent, futures prices indicate.

Morgan Stanley said it now expects the BOJ to go further into negative interest rates and increase its asset purchases marginally. Markets in mainland China, South Korea and Taiwan are shut Thursday for holidays.

Holdings in exchange-traded funds backed by the metal added 1.1 metric tons to 2,018.9 tons on Wednesday, data compiled by Bloomberg show.

Spot silver added 0.4 per cent, platinum advanced 0.2 per cent and palladium climbed 0.4 per cent.

BLOOMBERG