Gold price hits 4-mth low ahead of Fed statement – BULLION AFTERNOON

Otmane El Rhazi from The Bullion Desk.

Gold price moved lower on Tuesday afternoon, coming under renewed pressure from the US dollar and ahead of a keenly anticipated statement from the Federal Open Market Committee (FOMC).

Spot gold, which earlier in the session sank below $1,146 – its lowest since November 7 – was last at $1,447.70/1,448.50 per ounce, down $8.30 on Monday’s close.

The FOMC meeting remains the key focus this week. The accompanying statement will be scrutinised for any indication of the timing of an increase in US interest rates from 0-0.25 percent, where they have been since the 2008 financial crisis.

The expectation is that the reference to the word “patient” will be removed from the communiqué, indicating that the central bank will raise interest rates either in June or September this year.

The strong dollar also continues to put pressure on the price of gold – it was last at 1.0595 against the euro, albeit off Monday’s 12-year highs.

“There is potential impact of short position holders in the dollar, which, combined with new shorts in gold, particularly heading into what it actually pretty good physical demand at the moment from India perhaps increasing the risk of a short-covering rally,” Standard Bank’s Leon Westgate said.

In data today, German ZEW economic sentiment disappointed at 54.8 and the eurozone final CPI and employment change were as expected at -0.3 percent and 0.1 percent respectively. But ZEW economic sentiment at 62.4 was better than forecast as was the final core CPI at 0.7 percent.

From the US, building permits beat expectations at 1.09 million – a level last seen in October – but housing starts fell further than expected to 0.9 million, their lowest since October 2013.

“Both the dollar and gold have drifted higher on this data, highlighting the FOMC effect on markets – an indication of maintained strength in the sector lifts the dollar and concerns over whether this will influence the FOMC’s decision on rates sustains safe-haven demand against currency risk,” FastMarkets analyst Tom Moore said.

In the other metals, silver was little changed at $15.54/15.60, platinum at $1,092/1,097 was down $14 – a fresh low since July 2009 – and palladium at $762/767 was $16 lower.

(Editing by Mark Shaw)

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