The gold price made modest gains on Monday morning in thin conditions, with market participants mostly holding back ahead of this week’s Fed meeting.
Spot gold at $1,181.70/1,182.50 per ounce was up $2.20 on the pre-weekend close and up from one-month lows of $1,174.80. It is trading in a tight $5 range thus far. Likewise, silver hit a one-month low on Friday at $15.60 and was last up 14 cents at $15.82/15.87 per ounce.
“The precious metals are on the back foot, especially silver and platinum, but the weaker dollar should lend support,” FastMarkets analyst William Adams said. “But with equities strong, investor appetite remains low, with short selling still being seen in silver, although short-covering was evident in gold last week.”
“For now we would look for scale-down support and for dollar weakness to become a bullish factor should the dollar break support,” he added.
Despite the dollar clawing back some the losses sustained towards the later stages of last week at 1.0829 against the euro, market participants will be firmly looking ahead to Wednesday’s FOMC statement on monetary policy for direction.
While higher interest rates are not yet expected, the developing inflationary environment may well prompt comments from Fed chair Janet Yellen.
Inflation and slack in the labour market are the two factors that will guide the Fed’s hand in normalising monetary policy. Any move towards higher interest rates will raise the opportunity cost of holding gold and push investors into more yield-bearing assets such as bonds.
While Barclays Capital does not expect “any meaningful change” in the Fed statement, the central bank “may comment on strengthening inflation conditions and may take a view on whether first-quarter GDP weakness is temporary,” it said.
The broker does not foresee any change in monetary policy until September
Safe-haven interest on Greece appears to have waned despite the country edging closer to huge end-of-month payments and a 200-million-euro IMF payment on May 6. The country is still yet to agree a comprehensive bailout programme with its creditors, with negotiations set to continue this week.
“Interest in gold and silver is extraordinarily low with real money players, and the metals have become a mere plaything for those who like to push the price around, seemingly at will,” Marex Spectron’s David Govett said.
In a quiet day for data, German import prices at 1.0 percent were better than forecast. Later, the US flash services PMI is expected at 59.1.
In the PGMS, platinum was last up $2 at $1,118/1,123 per ounce, equalling three-week lows, while palladium was down $1 at $766/771.
(Editing by Mark Shaw)
The post Gold price off to quiet start, market looking to FOMC appeared first on The Bullion Desk.
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