Gold Prices Break Support, Sellers Battling For Momentum Following Fed Statement
New York (May 3) A firmer dollar and higher US yields maintained some downward pressure on gold, but prices found some support below $1,250 as the dollar made only limited gains after the Fed statement.
Gold prices edged slightly higher in US trading on Tuesday, but there was no move to attack the $1,260 resistance area and prices edged back below $1,255 in late trading.
Narrow ranges prevailed in Asia with the Japanese market holiday undermining activity.
The US ADP employment data was close to expectations with an April increase in private payrolls of 177,000 compared with consensus forecasts of around 175,000. The March gain was revised down to 255,000 from the original estimate of 263,000.
The overall reaction was muted with little overall impact on expectations for Friday’s non-farm payrolls data.
US Treasuries edged higher in immediate response to the data, but then lost ground again with further hints from US Treasury Secretary Mnuchin that the US would consider issuing bonds with maturities greater than 30 years.
USD/JPY edged higher as US Treasuries came under some pressure and this combination eroded gold support with a dip towards key support in the $1,250-1,252 area.
The headline US ISM non-manufacturing data was stronger than expected with an increase to 57.5 for April from 55.2 previously and consensus forecasts of 55.8.
Although there were concerns surrounding the employment component, USD/JPY tested 112.50 on release. Gold also declined to test support below $1,250, although there was no evidence of sharp selling following the break.
As expected the Federal Reserve left interest rates unchanged in the 0.75-1.00% range following the latest policy meeting. The FOMC expects slower growth for the first quarter of 2017 to be transitory and expressed further confidence in the labour market.
The risks to the economic outlook were again described as balanced. The statement certainly indicates that the Fed wants to keep the option of another rate increase in June very much alive with forthcoming data watched closely.
There was a measured reaction to the statement with the dollar initially gaining support as USD/JPY challenged resistance above 112.50.
With US bond yields also edging higher, gold continued to test support with a dip to 3-week lows below $1,250 and sellers will be more confident if they can keep prices below this level.
Dollar trends will continue to be important, although narrow ranges may prevail ahead of Friday’s US employment report.
Source: EconomicCalendar
