by Dalton Barker
Gold trade was lacklustre on Wednesday morning in the US amid a general market retreat before US central bankers issue their updated analysis on the economy later this afternoon.
Gold for August delivery on the Comex division of the New York Mercantile Exchange slipped $3.10 or 0.2 percent to $1,284.80 per ounce. Trade has ranged from $1,281.30 to $1,290.10 so far.
The Federal Open Market Committee (FOMC) concludes its two-day meeting with a statement at 13:00 central time, which will be followed by a press conference from chair Janet Yellen.
An interest-rate rise is unlikely but investors will want to see how the Fed reacts to the recent poor US labour market data and if it alters the previously scheduled pace of two rate increases.
“I suspect we will hear more of the same rhetoric from the last conferences, with Yellen stressing that the pace of rate rises will be data dependent,” David Govett of Marex Spectron said. “However, ahead of this, expect thin, nervous conditions with the market long of precious and hoping for a delay in any rate rise prospects.”
“If the tone of the press conference is dovish, I would look for gold to break $1,300 and hold above it, with a view to prices making new highs on the year,” Govett added, stating that a hawkish statement could depress prices to around $1,270.
Elsewhere, the Japanese Central Bank begins its monetary meeting today. In January, the bank introduced negative interest rates for the first time but results have been disappointing – near-zero growth and low inflation persist.
In the UK, the Leave campaign has surged in the polls in recent days – prediction markets are now pricing in a 39-percent chance the UK leaves the European Union.
At the start of the week, those same markets were only predicting a one-in-four chance the country would abandon the single market but new polls from show the Remain group behind for the first time since polling began.
Inflows continued overnight into exchange-traded funds – holdings in the funds tracked by FastMarkets climbed 2.89 tonnes to a new 2016 high of 1,935 tonnes.
“In line with our expectations, gold has continued to strengthen, reflecting stronger ETF buying and speculative interest – investors have turned more defensive amid heightened uncertainty stemming from the UK referendum,” FastMarkets analyst Boris Mikanikrezai said.
In data, the US PPI month-over-month in May gained 0.4 percent, above expectations of 0.3 percent. The core PPI, which excludes energy and food costs – at 0.3 percent was above the forecast of 0.1 percent.
The Empire State manufacturing index for June at six percent was up from consensus of -3.4 percent.
Besides the FOMC statement, crude oil inventories and TIC long-term purchases data are also scheduled for release later today.
Turning to international markets, Germany’s DAX and France’s CAC-40 rebounded today and were last up 1.1 percent and 1.3 percent respectively, while the dollar softened to 1.1229 against the euro.
In the other precious metals, Comex silver for July settlement was unchanged at $17.435 per ounce. Trade has ranged from $17.355 to $17.475.
Platinum for July delivery climbed $11.90 or 1.2 percent to $983.80 per ounce while the palladium at $544.75 was up $9.0 or 1.7 percent.
(Editing by Mark Shaw)
