Gold prices inched up on Wednesday from the lowest finish in almost three weeks, finding only modest support from weakness in U.S. stocks, ahead of minutes from the Federal Reserve’s latest meeting.
The yellow metal has failed to catch a strong bid amid continuing China-U.S. trade uncertainty, which would normally support bullion buying.
“As weaker stocks remind haven seekers to add gold at these lower range levels,” prices are still holding the $1,275 to $1,300 range, said George Gero, managing director at RBC Wealth management. Still, there are worries about Brexit with a slump in the British pound, as well as the U.S.-China tariff “tiff adding to inflationary pricing down the road” and the Fed minutes are due later Wednesday, “so volatility is at hand.”
June gold
GCM19, +0.17%
on Comex was up 60 cents, or 0.05%, to $1,273.70 an ounce. The finish Tuesday at $1,273.20 was the lowest most-active contract settlement since May 2, according to FactSet data.
“Despite this major [trade talk] uncertainty, there is no appetite among traders for holding the safe-haven gold,” said Naeem Aslam, chief market analyst at TF Global Markets, in a report.
He points to data showing the SPDR Gold ETF
GLD, +0.02%
has experienced its largest outflow since 2016, with an outflow exceeding $926 million in the first week of May alone. Notably, last week, the inflow was $120 million, which was better than the previous week’s outflow number of $303 million.
“Instead, the gold price has lost value due to the strength in the dollar index
DXY, +0.01%
and this trend is still robust,” he said. “Today’s FOMC minutes will be of particular importance because traders will be looking at two things: firstly, if the Fed is going to acknowledge that the trade war is a catastrophe. And secondly, the economic slowdown in global growth. If the minutes do not show any concerns about these two important issues, I think the path of the least resistance would remain skewed to the upside” for the dollar.
The dollar index was little changed at 98.047 in Wednesday dealings. It trades around 0.6% higher month to date.
Minutes for the rate-setting Federal Open Market Committee’s April 30- May 1 will be released at 2 p.m. Eastern Time, shortly after the gold futures settlement. The minutes may offer clues on the outlook for rate increases and set the next course for the dollar and gold.
“Fed minutes will impact only if they convey anything for June meeting or no interest rate cuts,” said Chintan Karnani, chief market analyst at Insignia Consultants. “Market participants still believe that trade war will result in Federal Reserve cutting interest rates in December. If Fed minutes tonight clearly states that there will not be any interest rate cuts this year, then U.S. dollar Index will gain more. Gold could sell off.”
Federal Reserve Bank of St. Louis President James Bullard said overnight that the FOMC may need to lower its short-term interest-rate target if inflation doesn’t appear on track to rise back to desired levels at 2%. Bullard is a voting member of the FOMC.
As for the trade front, China’s ambassador to the U.S. said late Tuesday that Beijing was open to restarting trade talks, but that the U.S. was indecisive. Meanwhile, President Xi Jinping has tried to rally the country, with a call for Chinese to start a modern “long march” to brace against the possibility of a lengthy trade conflict with the U.S.
Read: Charts suggest there could be a bull market in gold after eight lean years
Among other metals traded on Comex, July silver
SIN19, +0.24%
added 1.5 cents, or 0.1%, to $14.425 an ounce, but July copper
HGM19, -1.56%
lost 3.7 cents, or 1.3%, to $2.679 a pound. July platinum
PLN19, -0.86%
fell $7.60, or 1%, to $807.40 an ounce and June palladium
PAM19, -0.52%
traded at $1,302 an ounce, down $10.50, or 0.8%.
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Source : MTV
