The gold price was in negative territory on Thursday’s morning, giving up some of the ground it made in the aftermath of the yesterday’s Federal Open Market Committee (FOMC) meeting.
The yellow metal had surged after the FOMC warned of slowing US growth, peaking to $1,178 – its highest since March 6. It has since pared some of those gains and was last at $1,166/1,166.80 per ounce, down $5 on Wednesday’s close but off the four-month lows hit earlier this week.
In the keenly awaited FOMC statement on Wednesday, the US central bank removed the term ‘patient’ as widely expected but said that an increase in interest rates is unlikely next month. It also noted “economic growth has moderated somewhat” over the past month, which is a significant downgrade from its last statement in which it said activity rose “at a solid pace”.
“By dropping the word ‘patient’, the FOMC has the flexibility to consider a rate hike on a meeting-by-meeting basis, dependent on macro data, though it stated that higher interest rates were unlikely at the upcoming April meeting,” Credit Suisse said.
The longer timeline for rate rises and a lower rate trajectory helped boost commodities and stocks prices – market participants interpreted the statement as implying that the environment of easy monetary policy will last longer.
“Gold direction will depend heavily on how the currency markets continue to interpret and react to the Fed statement. The US dollar has been trading at multi-year highs against almost all of the world’s freely floating currencies, many of which are adopting more accommodative monetary policies,” James Steel at HSBC said.
The dollar has been fairly volatile today – having hit a low in early Asian trading of 1.0919 against the euro, it has since recovered slightly to 1.0655.
“The markets have overshot somewhat and we could be in store for some ‘backing and filling’ in the days ahead, which means slightly lower prices going into the next week,” INTL FCStone analyst Edward Meir said
“Conciliatory as the Fed statement was, the fact of the matter is that the US economy remains relatively strong (especially on the labour side), just as practically all other economies – with the exception of India – are slowing or are dead in the water,” he said.
In today’s data, the market awaits an ECB economic bulletin, while the EU economic summit kicks off today. From the US there will be unemployment claims, the current account, the Philly Fed manufacturing index and the CB leading index.
Silver at $15.87/15.92 was down slightly at $15.94 per ounce while the PGMs have recovered from multi-month and multi-year lows. Platinum, which on Tuesday had dived under $1,100 to its softest since July 2009, was last at $1,117/1,122, albeit down $7 on Wednesday’s close, while palladium at $770/780 was $10 lower.
“The PGMs have been trading more on bearish investment sentiment than on underlying fundamentals, we believe. If equities remain strong and other commodities beside gold continue to make gains, the PGMs have a good possibility of extending gains,” Steel said.
(Editing by Mark Shaw)
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