Gold dips as investors interpret FOMC meeting as ‘slightly hawkish’

Apr 30, 2015 - 2:44 PM GMT
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Gold prices declined in the early morning US trading period as yesterday’s Federal Open Market Committee (FOMC) hawkish tone continued to weigh on the yellow-metal.

Gold for June delivery on the Comex division of the New York Mercantile Exchange was last down $17.70 at $1,192.20 per ounce. Trade has ranged from $1,190.90 to $1,207.40 and is now below the 100-day moving average.

The members of the Fed’s policy board are locked in what’s become an increasingly public debate on when will be the right time to raise interest rates, which have been near zero since December 2008. The current market consensus is that the first hike will happen in the fourth quarter.

The FOMC said on Wednesday that economic growth slowed during the winter months, while the pace of job growth “moderated”, however, it placed some of the blame on “transitory factors” such as bad weather.

Gold slipped on the Fed’s assertion that the economic slowdown might be due to temporary factors that could dissipate and even reverse later in the year. This in-turn would clear the path for a interest rate increase, several analysts noted.

“The FOMC statement may have been interpreted as slightly hawkish by the gold market,” James Steel, an analyst at HSBC Securities, said. “Gold may remain weak in the near-term as the markets continue to digest the FOMC statement.”

In a particularly heavy data day, unemployment claims for Americans was 262,000 – the lowest level since 2000 – coming in under the 297,000 estimates.

In eurozone data, Core CPI flash estimate year-over-year met the forecast of 0.6 percent, while overall unemployment rate for March came in above estimates at 11.3 percent, with many pegging a 11.2 percent result.

In individual countries, Germany unemployment change for March was 8,000 with a forecast at 14,000. Meanwhile south, Italian monthly unemployment rate for March increased to 13 percent, missing the forecast of 12.6 percent.

“The focus for gold is still very much centred on the US – upcoming data prints will continue to be important as they feed into Fed policy expectations, and some volatility is to be expected around these releases,” Joni Teves, an analyst at UBS, said.

As for the other precious metals, Comex silver for May delivery was down seven cents at $15.92 per ounce. Trade has ranged from $15.91 to $16.70. Platinum for June delivery on the Nymex fell $25.10 to $1,136.40, while the most actively traded palladium contract was at $777.25, up $7.00.

Light sweet crude (WTI) futures rose $0.30 or 0.6 percent at $58.88 per barrel in the most active contract while the euro was less than a percent stronger against the dollar at 1.1136.

(Editing by Tom Jennemann)