Gold was stable above $1,120 per ounce on Wednesday morning, as investors remained on the sidelines ahead of the Federal Reserve’s July meeting minutes that could give clues on whether the US central bank might raise interest rates next month.
The spot gold price was last at $1,121.9/1,122.4, up $4.40 on Tuesday’s close. Trade has ranged from $1,116.3 to $1,124.2 so far.
Gold came under pressure for a time on Tuesday, dropping to $1,110 at one point following upbeat US housing starts data for July, which came in at an annualised 1.21 million, above consensus of 1.19 million and the highest level in almost eight years.
“The rapid price recovery shows that lower prices generate buying interest and cause the selling pressure among speculators to abate,” broker Commerzbank noted.
The focus today is on the US data, including Fed minutes from the July 28-29 meeting and July CPI number.
“Market participants are desperate for a clear signal, in either direction, about the likelihood of a September 2015 rate hike in today’s FOMC minutes,” MKS said in a note.
“Should the minutes be less hawkish than expected, especially considering the market is tight short-term (1 month-3 month gold still trading below flat), we will likely see a test of upside resistance at $1,125-1,133,” it added.
Still, participants said that the minutes are for a meeting held before the Chinese yuan devaluation which rocked the markets last week.
“A September rate rise is still possible, but inflation will need to show signs of picking up from its recent rock-bottom levels,” Mitsubishi said in a report.
“The Fed is likely to cite low inflation as a reason to delay rate hikes, and this will be gold-positive, in our view,” it added.
According to Fed Fund futures, the market is pricing in a December rate hike as the most likely outcome at this stage.
In other data today, Japan’s trade deficit widened as exports slowed, while its all industries activity index climbed 0.3 percent. The eurozone’s current account came in better than expected at a 25.4 billion euro surplus.
In the other precious metals, silver was last at $14.96/15.01, up 11 cents. Platinum at $992/997 was unchanged, while palladium fell $3 to $592/597.
(Editing by Martin Hayes)
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