BU: GOLD DROPS NEAR TO 4-WK LOW, INVESTORS EYE BANK MEETINGS
Gold futures are nearing a fresh low on Monday morning in the US amid a surge in the dollar ahead of major central bank meetings.
Gold for August delivery on the Comex division of the New York Mercantile Exchange fell $7.20 or 0.5 percent to $1,316.20 per ounce. The contract has now declined in three of the last four sessions.
The Federal Open Market Committee (FOMC) begins a two-day meeting but is not expected to adjust the Federal Funds rate even with new data showing the US labour market is expanding at a healthy clip into its eight consecutive year.
Still, investors will be keen to hear any changes to language pertaining to growth and inflation, especially after the UK’s Brexit decision. In the run-up to the meeting, the dollar index has climbed to a fresh high, peaking at 97.57 this morning.
“The US FOMC meeting on Wednesday and [advance second-quarter US GDP growth] on Friday will be critical for the stronger US dollar story that has been evolving over the past two weeks,” National Australia Bank (NAB) said.
Friday’s Bank of Japan meeting could have greater impact for markets give the weight of expectation of more aggressive fiscal and monetary stimulus following the recent election victory by Prime Minister Shinzo Abe’s Liberal Democratic Party in the recent upper house elections.
There has even been speculation the Bank of Japan could adopt to so-called “helicopter money”; however, governor Haruhiko Kuroda has ruled it unnecessary, saying there was “no need and no possibility”.
Investor interest in gold remains intact, albeit mildly – holdings in the exchange-traded funds (ETFs) tracked by FastMarkets gained 1.45 tonnes over the weekend to 2,085 tonnes.
“The support provided by investment demand is continuing to wane: although there were slight inflows into the ETFs again on Friday, these were not sufficient to compensate for the outflows of the preceding days,” Commerzbank said.
Over the weekend, the G20 meeting had a mixed tone, with central bankers and finance ministers concerned about the UK referendum vote although they agreed that despite the potential risks the global economy would improve over the next two years.
Last week, the International Monetary Fund (IMF) downgraded its 2016 growth estimate to 3.1 percent from 3.2 percent.
In a slow data day, Germany IFO business climate and UK CBI industrial order expectations are slated for release. The pace picks up somewhat later this week, with key data due from the US, Europe and Japan.
Turning to international markets, Germany’s DAX and France’s CAC-40 were up one percent and 0.6 percent respectively while the dollar softened by 0.1 percent to 1.0990 against the euro.
As for other precious metals, Comex silver for September delivery fell 21.9 cents or 1.1 percent to $19.470 per ounce. Trade has ranged from $19.405 to $19.695.
Platinum for October settlement declined $11.80 or 1.1 percent to $1,076.60 per ounce while palladium at $677.10 was down $8.95 or 1.3 percent.
