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Gold Dips Beneath $1,800 in Pre-Fed Shadow Boxing

CommoditiesJul 26, 2021 03:43PM ET
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© Reuters.

By Barani Krishnan

Gold settled beneath the key $1,800 level on Monday with longs in the yellow metal engaging in typical pre-Fed shadow boxing with shorts as taper and rate expectations reared their heads again.

This is going to be a busy week for markets with the Federal Reserve’s monthly policy statement, along with Chairman Jerome Powell’s news conference, on Wednesday.

The Fed aside, on Thursday, investors will also get a first look at second-quarter US GDP, or Gross Domestic Product, which is expected to show the peak of post-pandemic recovery.

Meanwhile, on Friday, the euro zone is to release a slew of data, including reports on inflation, GDP and unemployment.

Front-month gold futures on New York’s Comex settled down $2.60, or 0.1%, at $1,792.20 an ounce.

Gold longs managed to hold on to the $1,800 territory last week despite the yellow metal posting its first weekly loss in five week amid a disconnect from inflation expectations in the United States.

The Fed’s all-important Federal Open Market Committee isn’t expected to make any policy changes for July, although more details will likely emerge on the tapering discussions that started in June.

The Fed’s policy statement will be scrutinized for any mention of the timeframe for tapering its asset purchase program, although Powell made it clear in his recent testimony to Congress that the U.S. economy still needs the central bank's full support.

In June, policymakers began debating when to start cutting monthly purchases of $120 billion of Treasuries and mortgage-backed securities.

Powell may indicate that while a discussion on tapering has started, there is still time before officials reach a conclusion on what they will do. Policymakers are expected to highlight the risk from the rapidly spreading Delta variant, which investors worry could derail the economic recovery.

Most analysts expect the Fed to give a clearer indication of its plans for scaling back its quantitative easing program at its annual conference in Jackson Hole, Wyoming, in late August, before a formal announcement on tapering later in the year.

Aside from the Fed meeting, investors will get an update on the strength of the U.S. economy with an end-of-month data dump.

New home sales on Monday fell for the third month in a row in June, declining almost 20% from a a year ago.

The highlight is on Thursday with a first look at second quarter GDP and while expectations have been trimmed back in recent weeks, growth is still expected to be strong at 8.6% annualized. This would mark the recovery of all the lost output caused by the pandemic.

Figures on personal income and spending are due Friday, which include the Fed’s rumored favorite measure of inflation – the core personal consumer expenditure price index.

In the euro zone, second quarter GDP data on Friday will give investors some insight in the strength of the bloc’s economic recovery from a double dip recession as vaccinations pick up.

Meanwhile, inflation figures the same day are expected to show inflation hit the European Central Bank’s 2% target in July. The ECB has said inflation may be allowed temporarily to exceed its target when "especially forceful or persistent" monetary support is needed.

Last Thursday ECB President Christine Lagarde said a fresh wave of the coronavirus pandemic could pose a risk to the euro zone's economic recovery after the bank hinted at an even longer period of monetary support at its latest policy meeting.

Gold Dips Beneath $1,800 in Pre-Fed Shadow Boxing
 

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Comments (2)
Rony Joe
Rony Joe Jul 26, 2021 11:14PM ET
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Inflation is price going up. Simply, gold will be up too.
chrisP bacon
chrisP bacon Jul 26, 2021 4:07PM ET
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Inflation is 2%...maybe they mean up 2% every month....lumber is double what it was about a short couple years back. Coffee is 2x, Natural gas 50% higher, crude 20%, copper up 80%, corn up 50%, etc, etc.
Dale Sulser
Dale Sulser Jul 26, 2021 4:07PM ET
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Thanks Biden.
Joseph Torruella
Joseph Torruella Jul 26, 2021 4:07PM ET
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I wonder if it has anything to do with all those ***tariffs that were imposed a few years back?
Tyrone Jackson
Tyrone Jackson Jul 26, 2021 4:07PM ET
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Lmao you are a tool Joseph. A few years back? Causing inflation of 10 % now? Lol No tool, that is all Biden and the tools the voted for him . I hedged big time- up 100% and more knowing what that old man will do. Taxes Joseph?? Here they come . Liberals are all the same, Blaming someone else for 100 years .
Jack Drummond
Jack Drummond Jul 26, 2021 4:07PM ET
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Tyrone, even if you knew how to spell- it wouldn't help you to make any sense.
Jack Drummond
Jack Drummond Jul 26, 2021 4:07PM ET
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Yeah Dale, wouldn't the economy be better if your orange president had navigated our way through Covid EARLY ON. No, he just acted pitifully- trying to make dying Americans think he had it all in hand. Your wrecked economy originated because of the need of a lockdown. It was a conscious decision by the former guy to try to haze over the largest killer of Americans-- Ever. all for a failed and pointless attempt to stay in power. oh yeah, When he didn't win he tried to overthrow the government. That sure helped confidence in the American Way.
 
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