Mubasher: Gold prices remained steady early on Wednesday, heading for their a third consecutive monthly gain, amid anticipation of a US Federal Reserve rate decision, in which an interest rate cut are widely expected, Reuters said.
By 9:41 am GMT, spot gold stood stable at $1,430.74 per ounce, while US gold futures rose by 0.1% to $1,431.50 per ounce.
At 10:47 am GMT, spot gold ticked up by 0.04% to $1,431.45 per ounce, while gold futures rose by around 0.2% to $1,444 per ounce.
Expectations that the Fed and its major peers worldwide would cut interest rates, have placed the yellow metal on course for a 1.5% gain for July.
Fed funds rate futures are currently fully pricing in a cut of 25 basis points (bps) on Wednesday’s statement, the first since the financial crisis a decade ago, with another expected 25-bp cut by September.
“The gold market will focus more on the communication, whether the Fed leaves the door open for more rate cuts later this year citing global growth worries,” Julius Baer analyst Carsten Menke was quoted by Reuters.
Underpinning the Fed’s dovish stance, US consumer spending and prices rose only slightly last June, indicating a downturn in the economy and tepid inflation.
“Should the FOMC [Federal Open Market Committee] surprise either via a 50 bp rate cut or a more dovish tone than expected, the key top-side target for bullion remains at $1,450,” an MKS PAMP note was quoted by the news agency.
The industrial and trading services group shed light on other events that would provide direction for gold prices, including the growing prospects of a no-deal Brexit and dearth of progress in the trade talks between Washington and Beijing.
US President Donald Trump warned China against waiting his presidential term to end before finalising a trade deal, threatening tougher terms if re-elected in November 2020.
“The longer the trade tensions drag on [...] the more we need support from the Fed on the interest rate side,” Julius Baer’s Menke noted.
Lower interest rates tend to reduce the opportunity cost of holding non-yielding gold, making the bullion cheaper for non-US currency holders.
