Gold futures made modest moves on Wednesday, holding ground near the two-month low hit a day earlier, as financial markets awaited the latest update from a Federal Reserve that has so far stuck with a go-slow approach to interest-rate tightening.
Gold’s subdued action came as the dollar paused a rally that had turned the U.S. unit positive for 2018 ahead of the Fed’s monetary-policy release. The update hits Wednesday afternoon, at 2 p.m. Eastern, after the gold futures settlement.
June gold GCM8, -0.10% was down $1, or 0.1%, at $1,305.70 an ounce. It closed Tuesday at $1,306.80, the lowest since March 1, according to FactSet data.
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The ICE U.S. dollar DXY, +0.16% edged up by less than 0.2% to 92.61 early Wednesday. The buck, which gained nearly 2% in April against six major rivals, can influence appetite for dollar-priced commodities, including the yellow metal. The greenback marked its strongest month since around President Donald Trump’s election.
“It’s too early to call a bottom [for gold], as the dollar remains bid. The key level we are watching is the $1.20 euro/dollar area,” said Peter Hug, global trading director at Kitco Metals. The pair EURUSD, -0.1251% tickled that level in intraday action before trading more recently at $1.1968 per euro.
Fed policy makers are expected to leave interest rates on hold for now. Market participants are watching for any change to plans for a tightening path of two more rate increases in 2018, including as soon as next month.
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The Fed’s preferred inflation gauge, the personal-consumption expenditure price index, rose to a 12-month rate of 2%, hitting its annual target for the first time in a year and raising concerns that policy makers may be forced to increase rates at a faster clip than the two or three additional increases anticipated in 2018 to tamp down runaway price climbs. Any signals for a more-aggressive Fed in coming months would likely prove negative for gold prices in after-hours action.
“The important focus will be on the Fed’s language about inflation concerns. A heightened worry on this front will reinforce the narrative of a more-aggressive Fed and a continuing higher trajectory for the dollar,” said Hug. “We don’t see gold breaking down before the announcement. Technically, the $1,307 and, then again, the $1,302 area provide support. A break above $1,312 suggests a move with potential to the $1,322 level.”
The 10-year Treasury note yield TMUBMUSD10Y, -0.06% inched down to 2.966%, but still traded near the closely watched 3% line. Higher Treasury yields can spell weakness for gold, which like other commodities offers no yield.
In the lead up to the Fed, ADP’s April release on private-sector employment showed a 204,000 increase in jobs, offering little sign of a slowdown in job growth. It typically serves as a preview to Friday’s more closely watched jobs report from the U.S. government, also known as the monthly nonfarm payrolls data.
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In other metals trading, July silver SIN8, +1.51% outpaced gold’s move, up 23 cents, or 1.5%, at $16.365 an ounce.
July copper HGN8, +0.84% traded at $3.072 a pound, up 1.1%. July platinum PLN8, +0.19% rose 0.3% to $896.60 an ounce and June palladium PAM8, +2.78% rose 1.6% to $951.65 an ounce.
In ETF action, the SPDR Gold Shares GLD, +0.03% rose 0.3% and the iShares Silver Trust SLV, +1.25% gained 1%, while the VanEck Vectors Gold Miners GDX, +0.52% traded 0.5% higher.