Forex Market Commentaries - Gold On The Sidelines

Gold Sitting On The Sidelines Ahead Of FOMC

Apr 3 • Market Commentaries • 3811 Views • 2 Comments on Gold Sitting On The Sidelines Ahead Of FOMC

Gold futures are likely to edge higher this week in low volume trade, helped by a weaker dollar overseas, though prices could be weighed by poor demand as jewelers’ continue their protest against levies. A director at Commtrendz Research commented:

Improvement in the US economy will drive risk appetite

The most-active gold for June delivery on the Multi Commodity Exchange (MCX) was flat. Dollars and gold often move in opposite directions as the two compete for funds globally. Investors will also be eyeing the minutes of the Reserve meeting due later in the day.

The minutes will provide further insight on how actively the central bank is considering additional steps to boost growth. Fed policymakers on Monday signalled little appetite for further monetary steps to stimulate US growth in an economy that is gradually strengthening.

Indian gold traders have been on strike since March 17 an excise levy on unbranded jewelry of 0.3 percent, and a tax collected at source on transactions worth more than 200,000 rupees. The annual budget also doubled import duty on gold to 4 percent on value.

Gold held near $1,675 an ounce on today as investors took to the sidelines ahead of the release of minutes from the Federal Reserve’s latest policy meeting, which will be closely watched for clues on the direction of U.S. monetary policy.

 

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Ultra-loose monetary policy was a key factor in sending gold to record highs in 2011. A recent raft of firmer-than-expected U.S. economic data has curbed expectations for a fresh round of quantitative easing, which has put the brakes on gold’s climb. Spot gold was down 0.1 percent at $1,675.86 an ounce at 1016 GMT, while U.S. gold futures for April delivery were down $1.80 an ounce at $1,677.90.

“I think we’re in a bit of a soft patch for investment demand in the gold market, just given the lack of movement that we’re likely to see from monetary authorities over the course of the next quarter,” Deutsche Bank analyst Daniel Brebner said.

The minutes of the Fed’s March meeting due later are expected to offer further insight on how actively the central bank is considering additional steps to boost growth. Fed policymakers on Monday signaled little appetite for further monetary steps to stimulate U.S. growth in an economy that is gradually strengthening.

Prices have fallen around 6 percent since expectations that the Fed would launch another round of asset-buying pushed gold to $1,790 at the end of February, its highest since November. Yesterday Bank of America reduced their Gold forecast, following UBS who did the same last month. Gold demand is forecast to falling through the early part of the 2012 as recovery in Europe has slowed.

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