Gold price hovers around $1,250 an ounce before release of US Fed minutes
London (May 24) Gold steadied above $1,250 an ounce on Wednesday, taking a breather after the previous day’s fall as investors awaited minutes of the US Federal Reserve’s latest meeting for clues on the outlook for US interest rates.
The metal is highly sensitive to rising US rates, which increase the opportunity cost of holding nonyielding bullion, while boosting the dollar, in which it is priced. Spot gold was at $1,251.27 an ounce at 9.20am GMT, little changed from $1,250.76 late on Tuesday, when it slipped 0.7% after two days of gains.
The minutes of the federal open market committee’s (FOMC’s) early May meeting were due to be released at 6pm GMT on Wednesday. Interest-rate futures on Tuesday implied that traders saw an 83% chance of a rate increase in June, up from 79% on Monday.
"[Gold is] range bound today indeed, with the focus on the May FOMC minutes," Saxo Bank’s head of commodity research Ole Hansen said. "The market is looking to see whether the 75%-plus chance of a June rate hike is justified." Gold has risen 3% since hitting a near-two month low of $1,213.81 on May 9, driven chiefly by political turmoil in the US after President Donald Trump fired FBI director James Comey, which prompted a drop in stock markets and put the dollar under pressure. Expectations for US interest rates to rise in June and potentially again later in the year have been a major factor keeping gold prices pinned below chart resistance at $1,300 an ounce this year, however.
"While the selling appetite seems to be fading following four weeks of long liquidation, [gold] still needs a catalyst to break higher," said Hansen.
"At this stage the risk-reward seems skewed to the upside, but with the multiyear downtrend lurking just above I see muted fund interest until a potential break has been realised." World stock markets eased on Wednesday after China’s sovereign credit rating was downgraded and as investors eyed a pause in Wall Street’s four-day winning streak, the longest in over three months. The dollar was little changed against a currency basket.
US gold futures for June delivery were down $3.60 an ounce at $1,251.90.
Among other precious metals, silver was down 0.1% at $17.02 an ounce, while platinum was 0.2% lower at $938.30 an ounce. Both were correcting after hitting their highest since late April in the previous session.
Palladium was up 0.4% at $773.85 an ounce.
Source: BusinessDay
