Gold price little changed, focus on FOMC meeting – BULLION MORNING

Otmane El Rhazi from The Bullion Desk.

Gold price was little changed on Tuesday morning, with investors on the sidelines of the market ahead of the Federal Reserve meeting that kicks off later today.

The spot gold price was last at $1,155.00/1,155.70 per ounce, down $1 on Monday’s close. It has traded in a very narrow range of around $5 so far today.

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.

“If the Fed removes the ‘patient’ from its statement regarding interest rate hikes gold should head lower (although some of this will have been priced in as this is the consensus view),” MKS said in a note. “For now and up until the FOMC it seems gold will continue to range trade between $1,150 [and] $1,165.”

Higher interest rates would push investors away from gold toward more yield-bearing assets such as bonds. As well, a first rate rise could presage other increases, putting significant downside pressure on the yellow metal.

“The real risk will be that the Fed does not remove the word ‘patient’ from the statement and sounds out concern over the rate of the rise in the greenback – which may alter the timing of a potential cut. If this were to happen, especially considering the substantial increase of shorts over the past few weeks, gold could rocket higher back towards $1185-90 resistance,” MKS added.

The dollar remains strong at 1.0601 against the euro albeit off 12-year highs.

In data, Chinese foreign direct investment disappointed at 16.4 percent. Chinese Premier Li Keqiang warned over the weekend that the domestic economy faces what he called “considerable” downward pressure on growth and may struggle even to meet its annual GDP target of around seven percent.

Keqiang also hinted that the country could turn to “relatively big” stimulus measures if the economic slowdown were to hit the employment sector or fall to the “lower limit”.

In other 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.

Building permits and housing starts are due from the US this afternoon.

In the other metals, silver was little changed at $15.60/15.65 per ounce, down three cents. Platinum at $1,105/1,110 was down $1 and at its lowest level since July 2009 while palladium was $2 lower at $776/782.

“Robust European car registrations in February, up seven percent from a year earlier, with year-to-date registrations up 6.6 percent… suggest the auto industry is holding up better than the general economy,” FastMarkets’ William Adams said.

The post Gold price little changed, focus on FOMC meeting – BULLION MORNING appeared first on The Bullion Desk.