Ahead of the Federal Reserve policy meeting scheduled later today, the yellow metal eased from its previous gains as the greenback and global stocks remained steady. As the investors remained cautious, gold could remain even lower in the coming sessions.
One of the key factors in the decline of the yellow metal was the strength of the greenback these past few sessions. The appreciating currency makes it costly for the foreign buyers to buy the dollar-denominated commodities. Recently, the U.S. dollar soared as the market awaited for the Fed meeting and after the string U.S. housing-sector data.
A member of the treasury team of National Bank of Fujairah said that gold prices fell as the dollar firmed and a recovery in risk appetite supported world stock markets near nine-month highs ahead of central bank meetings in (the) US and Japan. Bank of Japan is having a meeting on Friday.
Federal Reserve
Prior to the meeting, a commodities research analyst explained that the gold market had become too complacent with US monetary policy, expecting a further postponement for interest rate hikes. If the U.S. economic data turn out to be positive, the central bank might pursue the rate hike, which has been on their table even before Britain decided to leave the European Union.
High interest rate would be one of the factors which can make growth difficult for the yellow metal. Also, the impact of Brexit in the financial markets and in the whole European economy could drive the yellow metal lower as investors choose to do risk aversion. The equity markets was relatively high and the bond yields skid, thus, market players may refer investments with lower risks.
Meanwhile, the Fed will likely keep the interest rate unchanged as the labor market received mixed data from the recent employment report. The central bank noted from its statement last month that the pace of improvement in the labor market has slowed. There has been an addition of 196,000 jobs from January to March, however, it went down to 147,000 jobs from April to June.
The Federal Open Market Committee confirmed last month that the group closely monitors inflation indicators and global economic and financial developments. While the FOMC thoroughly watch any sign of growth in the economy, Atlanta Fed President Dennis Lockhart claimed that the financial market turbulence they’ve seen does not seem to have caused direct harm to the country’s economy.
Gold Futures
On the Comex division of the New York Mercantil Exchange, the yellow metal lost 0.18 percent and market experts expect the commodity to fall $1, 300 per ounce soon. However, the yellow metal is fairly supported by the stable demand from China, India and Hong Kong.
Moreover, the recent discoveries of gold can strengthen the value of the precious metal. A report came lately that gold mining companies may consider increasing their respective budgets fro gold exploration. The gold team claimed that it would take them around 12 years to discover a hole and to have the first gold pour.
Separately, Barrick Gold Corporation (NYSE:ABX) is reported to be selling its stakes in African Acacia Mining PLC (LON:ACAA) and has discussed the matter with various miners in South Africa.