Gold retreats further from $1,300 despite Fed’s patient tone

Otmane El Rhazi from The Bullion Desk.

Gold retreated further from the key psychological $1,300 mark in early-morning London trading despite a bland and largely unchanged statement from the US Federal Reserve.

The spot gold price was $8.60 lower at $1,276.20/1,277.00 per ounce on Thursday morning, having traded in an intraday range of $15.

“The precious metals continue to consolidate after their strong start of year – their consolidation patterns look to be potential bull-flags,” FastMarkets analyst William Adams noted.

The Federal Open Market Committee (FOMC) said on Wednesday that it can be “patient in beginning to normalise the stance of monetary policy”, words that should fuel speculation that the prospect of a near-term interest-rate increase has diminished. The current market consensus is that the first rise will happen sometime in the second half of this year.

The committee made some small tweaks to its statement that indicate that the economy is healing, however. Not only did it remove “considerable time” from its language on tightening but it also noted that economic activity has expanded “at a solid pace”, which is an upgrade from “moderate pace” in its previous statement.

But as anticipated the Fed noted that lower energy prices had caused inflation to decline further below the objective of two percent. Still, the central bank still expects inflation to move towards this target over the medium term as slack from the labour market dissipates.

“Gold’s relatively lacklustre price action indicated that the FOMC statement did not pose much of a surprise to the bullion market,” HSBC’s James Steel said, adding that the short-term focus may now shift to tomorrow’s US fourth-quarter GDP data.

In data today, German unemployment dropped 9,000 to 2.84 million, the fourth month of declines, while the market awaits the country’s preliminary CPI figure later. In other data, eurozone M3 money supply at 3.6 percent was in line with expectations as were private loans at -0.5 percent.

Still to come are US weekly unemployment claims and pending home sales.

In other metals, silver has followed gold lower, slipping 30 cents to $17.64/17.69 per ounce.

In company news, Fresnillo, the world’s largest primary silver producer, reported a 15.5-percent year-on-year increase in silver production to 12.3 million ounces for the fourth quarter of 2014 from 10.7 million ounces in the same quarter in 2013.

In the PGMs, platinum at $1,243/1,248 per ounce was down $6, while palladium was $786/791 was down $4.

(Additional reporting by Tom Jennemann, editing by Mark Shaw)

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