MN: Gold in muted start; investors predict dovish Fed statement
The gold price handed back some of the gains made in the previous session on Wednesday.
The gold price handed back some of the gains made in the previous session on Wednesday morning while investors position themselves ahead of the conclusion of the FOMC’s monthly meeting, which is expected to give few clue on future measures.
Spot gold was last down $4.50 at $1,288.30/1,289.10 per ounce and confined to an intraday range of $8.
Also consolidating ahead of the Federal Reserve’s statement are silver, down two cents at $17.99/$18.04 per ounce, and platinum, up $1 at $1,261/$1,266. Palladium, though, was last at $783/789, up $10 or 1.3 percent.
“The precious metals all seem content consolidating recent gains, with palladium recovering somewhat from its recent weakness – again, we remain mildly bullish for the precious metals, especially because we feel the Fed will remain dovish,” FastMarkets analyst William Adams said.
While the Fed is widely seen raising interest rates for the first time since 2008, an increase is unlikely before mid-2015 given slack in the labour market and the impact of lower oil prices on the bank’s ability to stoke inflation.
Last week’s announcement about a quantitative easing programme in the eurozone will only delay an increase further, with concerns about growth other than in the US already underpinning the dollar, which remains close to 11 year highs against the euro.
Still, investors will once again scour the Fed statement for clues on forward guidance – a hawkish stance would damage gold’s appeal as an investment vehicle and push investors into more yield-bearing assets such as equities and bonds while a dovish tone and any indications of concern could push the metal higher.
“Today’s FOMC statement is expected to be a non-event, with no changes in forward guidance expected. The Fed is still expected to note that that underutilization of labour resources is ‘diminishing’ and that they can be ‘patient’ in waiting to normalize rates; a rate hike before April appears unlikely,” investment analyst Howie Lee at Phillip Futures said.
“There are also no projection materials nor a press conference by the FOMC, so volatility is expected to be contained,” he added.
Buying overnight in China was said to have been muted, according to MKS, with participants happy to sit on the sidelines ahead of today’s statement, while a small amount of profit-taking took place.
On Tuesday, gold rose sharply following poor core US durable goods data, which significantly undershot the 0.6-percent forecast at -0.8 percent and durable goods orders at -3.4 percent also fell short of expectations.
In data today, German import prices at -1.7 percent missed the forecast -1.4 percent, while the Gfk consumer climate at 9.3 was broadly in line with expectations.
No other frontline numbers are due today but the pace picks up sharply on Thursday – the German preliminary CPI and unemployment change, eurozone M3 money supply and private loans and US unemployment claims and pending homes sales data are set for release.
Friday sees the first of three announcements on US GDP growth alongside the eurozone CPI and core CPI flash estimates and a host of other numbers.
