Gold added $1.20 this morning but remains directionless ahead of Wednesday’s FOMC meeting minutes and the upcoming FOMC meeting the last of the month. Geopolitical tensions remain on high alert but seem to be holding under the boiling point as traders lack drivers to move in either direction. Silver is following the cues from gold trading at 21.033 up by 19 points, while platinum is at 1495.00. The dollar fell the most in more than a week as investors gauge the timing of Federal Reserve interest-rate increases after reports showing a strengthening jobs market. The Fed will release the minutes of its June 17-18 meeting on July 9. Policy makers have kept the benchmark federal funds rate in a range of zero to 0.25 percent since December 2008 to support the economy, while trimming monthly bond buying to $35 billion from $85 billion starting last year. Traders see about a 52 percent chance the Fed will increase the rate target to at least 0.5 percent by June next year, up from 40 percent odds at the end of last month, fed funds futures show.
Fed officials including Jeffrey Lacker and Narayana Kocherlakota are scheduled to speak later today, with Lacker addressing the “Economic Outlook, July 2014″, and Kocherlakota “Monetary Policy and the Economy.”
Gold ticked lower yesterday as investors continued to stress over the possibility of an earlier-than-expected hike in US interest rates, while palladium was trading near a 13-year high on supply worries. Palladium climbed to trade at 870.00 and gave back $2.30 this morning to trade at 867.10.
A strong US jobs report last week spurred speculation the Federal Reserve could increase rates soon on the back of a solid economic recovery. A hike would encourage investors to withdraw money from non-interest-bearing assets such as gold.
Some traders said a lack of support from physical markets could also weigh on prices. Physical demand in top gold consumer Asia has been weak as the metal is holding above $1,300. Many are waiting for a drop in prices before making any purchases. Meanwhile, gold is still seeing some safe-haven demand from geopolitical tensions in the Middle East and Ukraine.
The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust (ARCA:GLD), said its holdings rose 1.8 tonnes to 798.19 tonnes on Monday.
Industrial and base metals are trading in the red after lackluster industrial production from Germany hit the wires yesterday. Copper declined to trade at 3.254 remaining well above its average trading range and holding near its record highs. London copper steadied, but remained below four-and-a-half month highs seen last week after a surprise drop in German industrial production tempered demand expectations. Germany’s industrial output fell 1.8 percent on the month in May, its biggest drop in more than two years, as holiday days ate into working hours, construction slumped and geopolitics weighed, casting a shadow on its role as eurozone work horse.