Gold waits for conclusion of FOMC meeting

Jul 27, 2016 - 3:22 AM GMT
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The spot gold price continued to drift during Asian trading hours on Wednesday as the market waited for the US Federal Open Market Committee (FOMC) to conclude its meeting later today.

Spot gold was last at $1,319.05-1,319.45 per ounce, down just $0.05 from Tuesday’s close. Trading ranged at $1,316.65-1,320.30 so far.

While most market participants do not see the Fed raising rates this time round, encouraging economic data releases in the US has underscored expectations that the FOMC will be more upbeat on its assessment of economic activity, said ANZ Research on Wednesday morning.

More positive data came out of the US on Tuesday. CB consumer confidence over the same period exceeded expectations at 97.3, besting consensus of 95.6. New home sales in June hit 592,000, with projections estimating 560,000 sales. The Richmond manufacturing index in July was 10, a stark divergence from the -4 forecast.

The S&P/CS composite-20 HPI year-over-year in May, however, gained 5.2 percent, a touch below the 5.6 percent estimate. Flash services PMI for July stood at 50.9 – missing the 51.2 forecast.

While the Fed is likely to keep rates unchanged, the post-meeting statement will be closely scrutinised to see whether the Fed is edging towards a rate hike at upcoming meetings given recent Fed commentary, said National Australia Bank on Wednesday morning.

“Many of the ambiguities that the Fed cited in the June FOMC Minutes – the labour market and Brexit – have cleared following the stellar June payrolls print and limited spillovers from the Brexit vote on financial markets,” the bank noted.

Market participants currently see a higher chance of a Fed rate hike in September – the probability has risen to 21 percent on Tuesday from 19 percent a day ago, according to the CME Group Fedwatch Tool. But majority still does not expect higher rates this year.

Precious metals could prove to be vulnerable post-Fed, especially if the dollar resumes its rally, said Edward Meir of INTL FCStone late on Tuesday.

“We suspect that the Fed will not surprise in any way, likely acknowledging the broad strength of the US economy, while highlighting the headwinds that are still out there, including the drawn-out ramifications of Brexit along with slowing global growth,” he said.

Other US data due later on Wednesday includes core durable goods orders, durable goods orders, pending home sales and crude oil inventories.

In currencies, the US dollar index rose 0.06 percent to 97.19 so far on Wednesday.

In other commodities, the Brent crude oil spot price rose 0.56 percent to $44.81 per barrel, and the Texas light sweet crude oil spot price increased 0.42 percent to $42.87.

In equities, the Shanghai Composite is up 0.19 percent to 3,056.84.

In other precious metals, silver fell $0.017 to $19.60/19.635. Platinum was last at $1,091/1,096, up $7, and palladium rose $3 to $686/692 recently on Wednesday.

On the Shanghai Futures Exchange, gold for December delivery was last unchanged at 285.00 yuan per gram, and the December silver was flat at 4,332 yuan per kilogram.

(Additional reporting by Dalton Barker)