Gold futures returned to negative territory Wednesday morning in the US with investors heading to the sidelines before the US central bank issues its latest monetary statement.
Gold for December settlement on the Comex division of the New York Mercantile Exchange was last down $7.40 or 0.6 percent to $1,349.50 per ounce. Trade has ranged from $1,345.80 to $1,353.20.
The Fed meeting minutes is the prime market event today and it has attracted more attention following New York Fed president William Dudley’s comments on Tuesday that a September rate hike is possible.
His colleague, Atlanta Fed president Dennis Lockhart, also spoke in support of at least one rate hike between now and the end of the year, citing optimism over third quarter GDP after second quarter disappointed at a measly 1.2 percent increase.
Still, prediction markets are currently assessing roughly a one-in-five chance of a September hike and a coin-flip odds that it occurs before the year concludes, according to the CME Group FedWatch.
“All eyes will be on this and as to whether the Fed is sounding any more hawkish than it did last month,” David Govett of Marex Spectron said. “Most participants are discounting a rate rise in the near future, so there may well be some big moves if anything is out of the ordinary. Ahead of this, I would advocate staying on the sidelines.”
Meanwhile in paper holdings, exchange-traded-funds tracked by FastMarkets climbed 5.5 tonnes overnight, bringing the total to 2,116 tonnes overall. Investors have consistently bought dips and remain committed to the safe-haven asset with the macroeconomic backdrop still dour.
“Price action in gold has seen a mild pullback despite overstretched fund positioning,” Andy Farida, FastMarkets analyst, said. “ETF investors have stayed strong too. However, market sentiments may have underestimated a potential rate hike in September.”
“If that is the case, a hawkish tone from today FOMC minutes could increase the risk to the downside,” he added.
In a light data day, UK average earnings and unemployment rate are due, while US crude oil inventories will be released this afternoon.
Turning to European markets, Germany’s DAX and France’s CAC-40 were down one percent and 0.6 percent respectively, while the dollar was virtually unchanged at $1.1276 against the euro.
As for other precious metals, Comex silver for September delivery fell 15.4 cents or 0.8 percent to $19.810 per ounce. Trade has ranged from $19.535 to $19.895.
Platinum for October settlement declined $7.10 or 0.6 percent to $1,117.0 per ounce, while the most active palladium contract stood at $701.0 per ounce, down $4.10.
