Gold steady ahead of US Fed minutes

Otmane El Rhazi from The Bullion Desk.

Gold was steady in afternoon London trading ahead of releases of the US FOMC minutes later this evening.

The spot gold price at $1,214.20/1,215 per ounce was down $1.30 on Tuesday’s close, having traded within a $10 intraday range.

Attention has turned to the forthcoming release of the minutes from the Federal Reserve’s December meeting, which will be examined for clues as to when the US may choose to raise interest rates from their current near-zero levels.

“[These] could draw some attention from market participants, particularly given the lack of consensus in interpreting the FOMC statement last month. The details should provide further insight and help set the tone for policy expectations,” UBS’ Edel Tully said.

A move towards higher interest rates would have negative implications for the gold market, pushing investors towards yield-bearing assets such as bonds and equities.

In data today, the ADP non-farm payroll data at 241,000 significantly surpassed the forecast 227,000. Currency movements were typically limited from the result, however, with today’s announcement an appetiser for the blockbuster non-farm payroll jobs report on Friday.

“A stronger-than-expected payrolls report would exert some downward pressure on gold and potentially spook some recent weak longs,” Tully added.

In other data today, poor European inflation data added to the prospect of quantitative easing in the eurozone.

The CPI flash estimate at -0.2 percent undershot the expected 0.3 percent and the retail PMI was lower at 47.6, while the unemployment rate was as expected at 11.5 percent.

The drop into negative territory in the inflation rate will pile more pressure on the European Central Bank to commence unconventional monetary policy measures to stoke inflation. The figure remains well short of the bank’s two-percent target, although the core figure at 0.8 percent was better than expected.

Brent crude oil crashed through $50 per barrel earlier in the session and WTI hit a fresh low at $46.80 after rumours – later quashed – circulated on social networking Twitter that King Abdullah of Saudi Arabia had died.

In other metals, silver at $16.55/16.60 per ounce was up 15 cents and platinum at $1,216/1,221 was $2 higher but palladium at $784/790 was down $13 at a near-three-week low.

(Editing by Mark Shaw)

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