Gold prices fell on Wednesday as optimism over Sino-U.S. trade talks and hopes of rate cut from central banks hit demand for bullion ahead of the U.S. Federal Reserve's monetary policy decision later in the day.
Gold prices fell on Wednesday as optimism over Sino-U.S. trade talks and hopes of rate cut from central banks hit demand for bullion ahead of the U.S. Federal Reserve’s monetary policy decision later in the day. Spot gold fell 0.3% to $1,341.67 per ounce at 0953 GMT. U.S. gold futures slipped 0.4% to $1,345.70 per ounce. “Donald Trump’s tweet that he will meet (Chinese President) Xi Jinping has created speculation in the market that there might be some solution on the trade war,” said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers. “That has supported global markets and equities have risen.”
Trump said on Tuesday he had spoken to Chinese President Xi Jinping and that the two leaders’ teams would restart trade talks after a long lull in order to prepare for a meeting at the G20 summit later this month. World stocks held near two-week highs on Wednesday as investors bet on a worldwide wave of central bank stimulus, with expectations building that the United States and the euro zone may deliver interest rate cuts as early as July.
“Tonight though there won’t be a rate cut (by the Fed), there will be ground work for future rate cuts. Markets are focusing on that too,” Trivedi said, adding gold was seeing some profit booking ahead of the event. All eyes are now on the Fed which is scheduled to release a statement at 1800 GMT, followed by a press conference by Chairman Jerome Powell. The Fed is widely expected to stand pat on monetary policy this time but open the door for an interest rate cut at its next meeting in July.
“We urge investors to temper bullish expectations on gold as an improvement in risk appetite from dovish monetary policy will cap gains for the non-interest bearing asset,” Phillip Futures said in a note. Denting the metal’s appeal, the dollar index held near a more than two-week high, supported by a dovish ECB and bearish eurozone economic data. “If the Fed comes out dovish or more dovish or as dovish as markets are pricing, it will weaken the U.S. dollar, which will add to gold’s allure,” said Stephen Innes, managing partner at SPI Asset Management. Among other precious metals, silver dipped 0.5% to $14.94 per ounce, while platinum was down 0.6% to $794.88 per ounce. Palladium gained 0.9% to $1,493.11 per ounce, after hitting its highest since March 27 at $1,496.51 earlier in the session.