Investing.com -- Gold futures fell back slightly on Wednesday ahead of a rate statement by the Federal Reserve, as worse than expected GDP data caused the dollar to fall sharply.
On the Comex division of the New York Mercantile Exchange, gold for June delivery fell 4.20 or 0.35% to $1,209.20, halting a two-day rally. Previously, gold had spiked more than $30 an ounce as investors awaited hints from the Fed on the timing of the first interest rate hike in six years.
Gold reached a session-high of $1,213.50 in European afternoon trading, ahead of the U.S. Department of Commerce's release of Gross Domestic Product (GDP) growth for the first quarter of 2015. While analysts anticipated a slow period of growth for the first three months of the year, the figures released on Wednesday were even softer than expected.
Gold likely gained support at 1,183.20, the low from Mar. 31 and met resistance at 1,213.90, the high from April 28.
U.S. GDP for the first quarter grew at 0.2%, far below expectations for growth of 1%. The figures were in line with forecasts by the Federal Reserve of Atlanta, which predicted GDP growth of 0.2%. GDP revisions for the fourth quarter of last year remained unchanged at 2.2%.
Exports continued to serve as the biggest drag on the U.S. economy, underscoring the impact of the stronger dollar and the extended West Coast port strike. Real exports of goods and services decreased 7.2 percent in the first quarter, in comparison with a increase of 4.5 percent in the fourth. In terms of price data, the GDP Price Index remained at minus 0.1 -- pulled down by lower energy prices. For the fourth quarter of last year, the level was unchanged – also at minus 0.1.
The soft data weighed on the dollar which continued to retreat against the euro. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 1.25% to 94.96. EUR/USD also rose to 1.1149, its highest level since Mar. 5. The euro is up more than 2.6% against its American counterpart since late last week, its highest five-day gain since 2009.
The Fed is expected to keep its benchmark Federal Funds Rate at its current level of zero to 0.25%, when it issues a statement following the conclusion of its two-day Federal Open Market Committee (FOMC) meeting on Wednesday afternoon. When the Fed released the minutes from its March meeting earlier this month, the committee ruled that an increase in the target range for the rate remained "unlikely at the April meeting."
The FOMC appears uncertain on the timing of its first interest rate hike since 2009, amid a possible growing divide between Fed governors on a date for lift-off. Although the Fed has not ruled out lift-off in June, analysts increasingly believe that a rate hike will not occur until the fall. The CME Group (NASDAQ:CME), for instance, isn't pricing a rate hike in its models until October.
Gold struggles to compete with high-yield bearing assets in periods of rising interest rates.
Elsewhere, silver for July delivery rose 0.028 or 0.17% to 16.658.
Copper for July delivery 0.014 or 0.51% to 2.801.