BULLION LATEST 13/12: Gold under pressure ahead of FOMC statement

Gold prices inched higher during Asian morning trading on Wednesday December 13 after hitting an almost five-month low overnight, but investors remain in ‘wait-and-see’ mode ahead of the conclusion of the US Federal Open Market Committee’s (FOMC) two-day meeting later today.

The spot gold price was recently quoted at $1244.05-1244.35 per oz, up by $0.90 as of 11:59am Shanghai time. Trade has ranged from $1242.48-1245.25 so far today.

  • Gold prices have edged higher this morning but remain under pressure from a looming US interest rate increase.
  • The yellow metal fell to its lowest level since July 21 in the previous session at $1,236.55 per oz.
  • “Gold dropped to its lowest level in four months as investors appeared to eagerly await a potential US interest rate hike... The USD continued to strengthen across all major pairs as the FOMC meeting wraps up on Wednesday. The buying strength out of Asia has abated despite the current lower prices and wider arbitrage premiums. Both silver and platinum followed in the wind tail of gold as both metals reached their lowest level since the beginning of this year,” Commerzbank noted on Wednesday.
  • The dollar index was down by 0.11% at 93.96 as of 12.16am Shanghai time but remains in high ground. It had reached a high of 94.22 on December 12, which was its highest since November 14.
  • “With most markets in a holding pattern ahead of tonight’s FOMC rate decision, we expect muted trading in gold as well,” Jeffrey Halley, senior market analyst at Oanda, said on Wednesday.
  • “The FOMC statement will be crucial this evening, setting the tone for the trajectory of US rates into 2018. Complacency in the last few months in this regard means that if the Fed holds its intention to hike at least three times next year, we could see an outsized reaction higher in both the dollar and yields. Neither would be good news for long gold positioning,” Halley added.

Silver, PGMs

  • In the other precious metals, the spot silver price was up by $0.012 to $15.693-15.750 per oz. Platinum was up by $1 to $876-881 per oz and palladium increased by $3 to $1,013-$1,014 per oz.
  • On the Shanghai Futures Exchange, gold for June delivery was little changed at 271.75 yuan ($41.04 per gram, while the June silver was down by 0.1% at 3,728 yuan per kg.

Currency moves and data releases

  • The dollar index was down by 0.11% at 93.96 as of 12.16am Shanghai time - the index had reached a high of 94.22 on December 12, its highest since November 14.
  • In other commodities, the Brent crude oil spot price was up by 0.22% to $63.92 per barrel, and the Texas light sweet crude oil spot price increased by 0.16% to $57.51.
  • “China’s State Council approved listing the country’s long-awaited oil futures in Shanghai, a key step for the world’s largest crude buyer to launch an international contract in its own currency,” Bloomberg noted on Tuesday.
  • In equities, the Shanghai Composite was down by 0.12% to 3,276.83.
  • In data on Tuesday, the US NFIB small business optimism index rose to 107.5 in November, which is its highest level since 1983. Nearly half of respondents (48%) expect business conditions to improve over the next six months compared with 32% in October, while 34% expect higher sales, the highest reading since 2005.
  • “The US headline producer price index rose a stronger-than-expected 0.4% month on month and 3.1% year on year in November. The core measure rose 0.3% month on month and was steady at 2.4% year on year. It points to a further firming in pipeline inflation pressures. The UK headline consumer price index (CPI) rose to 3.1% year on year, the highest rate since March 2012, boosted by airfares and computer game prices. Core inflation was unchanged,” ANZ Research noted.
  • The economic agenda is busy today with UK and EU employment data of note while US data includes CPI, core CPI, crude oil inventories and the much-awaited FOMC statement.
  • In addition, US President Donald Trump is speaking in Washington DC.
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