Gold tanked on Wednesday falling to the low 1290 level before recovering a few dollars to end the day at 1296.90 but gave back again this morning to trade at 1295.70. Traders were surprised with the release of US GDP which soared above forecasts, while the Fed did exactly what was expected and continued to hold their course. Traders were disappointed that the decision did not include a forecast of rate increases but no one really expected it to do so.
The Federal Reserve reaffirmed it was in no rush to raise interest rates, even as it upgraded its assessment of the U.S. economy and expressed some comfort that inflation was moving up toward its target. After a two-day meeting, Fed policymakers took note of both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labor market. Data on Wednesday also showed that the U.S. economy rebounded sharply in the second quarter as consumers stepped up spending and businesses restocked. Gross domestic product expanded at a 4 percent annual rate after shrinking at a revised 2.1 percent pace in the first quarter.
The US Dollar Index is moderately positive from last few days which can keep the bullion under pressure. Today also in evening we have some important economic data mainly over EU CPI and US Jobless claims number. The ECB has been pressurizing the euro lower so at to counter lower inflation in an export oriented economy. Overall cues over weaker euro, FED comments and better US GDP number might continue to weigh on the yellow metal. Traders maintain selling bias though intensifying tensions over Ukraine may not prompt any major fall in the commodity.
Bullion saw lower trade last week as markets continued to take negativity over lower demand from China while positive economic data supported downside. If we look into the broader factors for the commodity; major equities continue to extend gains while we saw the USD gain above the 81 mark. On the demand side, physical demand in China declined during the first half of 2014. Gold Association in the country reported a 19% drop in gold demand in first six months .However, production in China during H1 increased 9%.
Silver is trading at 20.633 up by 36 points this morning. Investors renewed interest in Silver as an asset class led to rise in prices on Wednesday as it gained by around 0.3 percent in the international markets in contrary to the fall in gold prices. Strength in the base metals complex also led to the rally.
Copper is in the red at 3.234 but recovered yesterday from its recent low. London copper was underpinned this morning by indications that the U.S. Federal Reserve is not hurrying to raise interest rates, even as the world’s top economy logged robust second quarter growth that brightened the outlook for demand. Eurozone economic sentiment unexpectedly improved in July despite the deepening crisis between the West and Russia over Ukraine, data showed, and inflation expectations among consumers and companies edged up. The London Metal Exchange’s attempts to cut backlogs at warehouses with new rules are likely to be delayed again for several months after judges declined to make an immediate ruling on a case holding up the reforms.