Gold price faces strong resistance at $1,300, FOMC likely ‘non-event’

Otmane El Rhazi from The Bullion Desk.

Gold price is slightly lower this morning during the Asian trade, as markets await the directional cues from the conclusion of the FOMC meeting to be held later today.

On Tuesday, the precious metals complex ended the day in the positive on the release of softer US data, but gold price was unable to hold on to gains especially after testing the $1,300 level in recent days.

Spot gold was last at $1,291 per ounce, $2.60 lower than where it ended on Tuesday.

“We are still looking at gold to stay on the bear side, pricing in a firmer dollar with $1,300 as a strong technical resistance,” said analyst Barnabas Gan from OCBC Bank.

In the busy data flow yesterday, US durable goods orders for December fell 3.4 percent from the previous month against a forecast 0.6 percent increase.

The weak orders data contrasts with substantially better survey data: The Conference Board’s consumer confidence measure climbed from 93.1 to 102.9 in January, the highest level since August 2007. Flash manufacturing PMI rose from 53.5 in December to 54.2 in January as well.

The Richmond Manufacturing Index was in line at 6 but it was the industrial-activity sensitive durable goods numbers that weighed, pulling down equity markets.

For the day ahead, markets are likely to focus their attention on the outcome of the FOMC meeting that has started yesterday. While no major policy changes are expected, it will be of interest to watch how the members see the interest rate outlook given pockets of slowdown in the economy and potential oil-led disinflation.

“Today’s FOMC statement is expected to be a non-event, with no changes in forward guidance expected. The Fed is still expected to note that that underutilization of labour resources is ‘diminishing’ and that they can be ‘atient’ in waiting to normalize rates; a rate hike before April appears unlikely. There is also no projection materials nor a press conference by the FOMC, so volatility is expected to be contained,” said investment analyst Howie Lee at Phillip Futures.

Others in the precious metals complex are trading lower today as well – silver at $17.95 is 11 cents lower. Platinum declined $7.50 to $1,257 per ounce and palladium slipped $6 to $773.

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