Gold price remains under pressure from Fed’s change in stance

Otmane El Rhazi from The Bullion Desk.

The gold price was under pressure on Thursday morning – investors appear to have interpreted last night’s Federal Reserve’s statement on monetary policy as slightly hawkish, though movements remain thin.

Spot gold was last at $1,203.00/1,203.80 per ounce, down $1 on Wednesday’s close, having earlier tested support at $1,200. Silver was up seven cents at $16.60/16.65.

“The FOMC meeting had limited price impact on gold,” UBS’ Edel Tully said. “The fact that the Fed seemed less worried about the weak first-quarter GDP report than the market may have anticipated is slightly negative.”

The bank removed all references to calendar dates regarding when it may choose to raise interest rates, instead stressing the importance of data and the gradual reduction in slack in the labour market.

The US economy grew at an annual rate of 0.2 percent in the first quarter of this year, below the expected 1.0 percent and down from 2.2 percent in the fourth quarter of last year.

The FOMC attributed slowing economic growth during the winter months and a moderating pace of job growth partly to “transitory factors” such as bad weather.

Gold remains one of few commodities not benefitting from the dollar trading at its lowest in two months against the euro at 1.1234 and at 94.39 against the basket of currencies, also a two-month low.

“The precious metals should be heading higher given the dollar’s break lower; the fact they are not, at least not yet, shows that confidence in the metals is weak,” FastMarkets analyst William Adams said.

“It almost looks as though the market is looking for excuses not to rally, hence the market hanging on the Fed’s use of “transitory”. With equities looking weaker and the dollar declining, we would not be surprised if investors looking to protect their wealth, viewing gold as a ‘relatively’ cheap safe haven,” he added.

Gold also appears to have largely shrugged off this morning’s swathe of mixed data. German retail sales at -2.3 percent missed expectations at 0.5 percent as did the German unemployment change at -8,000, although the Spanish CPI at -0.6 percent and flash GDP at 0.9 percent bettered consensus.

The overall eurozone CPI and the unemployment rate are expected later and may bolster the euro if they beat forecasts.

This afternoon the US will release weekly unemployment claims, the employment cost index, the core PCE price index and personal spending figures.

The PGMs were modestly higher – platinum was last at $1,149/1,154 per ounce, up $1, while palladium was up $4 at $782/787.

(Additional Reporting by Dalton Barker, editing by Mark Shaw)

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