FB: Comex Gold In Narrow Range As Traders Await Outcome Of FOMC Meeting
(Kitco News) – U.S. gold futures are nearly steady early Wednesday as traders take to the sidelines to see the outcome of a two-day meeting of the Federal Open Market Committee.
The FOMC is scheduled to release its post-meeting statement and economic projections Wednesday at 2 p.m. EDT, and Chair Janet Yellen is scheduled to conduct a press conference half an hour later. Typically, any hawkishness from the Fed supports the U.S. dollar and undercuts gold, while a Fed perceived as staying on hold with interest rates tends to help gold.
Just before 8 a.m. EDT, gold for December delivery was nearly steady – up 30 cents – at $1,237 an ounce on the Comex division of the New York Mercantile Exchange. Spot metal was up $1.65 to $1,236.40 an ounce. December silver eased 8.1 cents to $18.64.
The London a.m. gold fixing was $1,236.50, up from the Tuesday afternoon fixing of $1,232.25.
“It’s extremely quiet,” said Afshin Nabavi, head of trading with MKS (Switzerland) SA. “The range has been very, very tight. I guess everyone is waiting for the FOMC after the (Comex pit) close. I don’t really see any fireworks before then.”
Until then, Nabavi said he anticipates a range-bound market, with roughly $1,231-32 on the downside and $1,240-42 on the upside. So far Wednesday, the December futures have held in an even tighter band of $1,233.40 to $1,239.80 an ounce.
A wide range of commodities have been weaker lately in response to a stronger U.S. dollar, said Bjarne Schieldrop, chief analyst with SEB Commodity Research. Now, he continued, markets are pausing to see what type of forward guidance the Federal Reserve offers on future interest rates.
“Most expectations are that interest rates will increase in the U.S. next year mid-year,” he said. “The question is will it happen sooner or later than that? Depending on the language in the statement, the market could continue to be more bullish on the U.S. dollar, and if that happens, we could see a further trend downward in gold…. If they postpone any increase to further down the road, that would be bullish for gold.”
A number of economists have said with the bond-buying program known as quantitative easing winding down, the Fed might announce a change in its forward guidance. In particular, some have suggested policymakers might drop the words “considerable time” used to describe how long before interest rates rise after the end of QE.
However, investor and newsletter writer Dennis Gartman suggested the Fed may well keep the phrase “considerable time,” citing a webcast Tuesday from Jon Hilsenrath of the Wall Street Journal, who suggested the Fed may instead try to “qualify” the statement via rhetoric. “Given the economic backdrop, they don’t want to send a signal right now that rate increases are imminent,” Hilsenrath said.
Gartman said Hilsenrath is perceived to be a “receiver” of information from “highly placed and well informed sources within the Fed” and has rarely been wrong. “Further, when wrong, he’s been wrong on small issues, not issues as large as this,” Gartman said.
While the FOMC is the market’s immediate focus, traders are also awaiting a Scottish vote on independence from the U.K. on Thursday.
“That could have an influence on the (British) pound and indirectly may have an influence on the gold,” Nabavi said. “So people are a bit cautious.”
While awaiting the FOMC outcome, traders will have several U.S. economic reports to digest Wednesday morning. This includes the August consumer price index and second-quarter current account at 8:30 a.m. EDT, followed by the National Association Homebuilders market index at 10 a.m. CPI is expected to be steady, while CPI excluding the volatile food and energy sectors is forecast to be up 0.2%.
