Gold Prices Up With Fed Minutes In Pipeline
Gold prices edged higher Wednesday, as the U.S. dollar drifted lower ahead of events that may reinforce the U.S. Federal Reserve’s intention to slow the pace of monetary stimulus.
Gold for August delivery reversed an Asian loss to gain $7, or 0.6%, to $1,252.80 an ounce in electronic trade. Gold saw a turn lower overnight as the U.S. dollar advanced against the euro and other major currencies
Strength in the greenback tends to pressure dollar-denominated commodities such as gold. But the dollar slipped moving into European trading hours ahead of the Wednesday release of minutes from the Fed’s monetary policy meeting in June. Fed Chairman Ben Bernanke said last month that if the economy continued to improve, the central bank may begin to taper its bond-purchasing program from $85 billion a month by as early as this year.
Bernanke on Wednesday afternoon is expected to take questions from an audience of prominent economists at their conference in Boston.
Gold futures on Tuesday marked a second consecutive session of gains, aided in part by a bigger-than-expected rise in Chinese consumer prices in June and reports of higher demand for physical gold.
In Hong Kong equity trading Wednesday, shares of Chow Tai Fook Jewellery Group Ltd. surged as much as 16% after the retailer said heavy demand for gold products led to its same-store sdales nearly doubling for the first quarter.
Gains in gold prices tend to be met with investor liquidation, in particular gold exchange-traded funds liquidation, wrote HSBC analyst James Steel to clients, noting that combined gold-ETF holdings have now dropped below 2,000 tons, the lowest levels since 2010.
“Short of a sharp change in investor risk sentiment, it will be hard for gold to trade much high,” said Steel. The release of the Fed’s June-meeting minutes “may impact gold especially if the minutes show greater support for the tapering of quantitative easing policies.”
Quantitative easing by the Fed and other central banks worldwide has been credited for supporting a rally in gold in recent years.
Steel also said the International Monetary Fund’s cut on Tuesday of 2013 and 2014 global growth forecasts “holds slightly negative implications” for gold and other precious metals as the IMF warned of a slowdown in key emerging markets and persistent recession in the euro zone.
In other Wednesday trade, silver for September delivery rose 7 cents, or 0.4%, to $19.20 an ounce.
September copper rose 1 cent, or 0.2%, to $3.07 a pound. Platinum for October delivery fell $1.60 to $1,367 an ounce. But September palladium rose $4.30, or 0.6%, to $701.65 an ounce.
Source : Marketwatch
