· Gold traded little changed on Wednesday as investors waited for cues on the U.S. central bank’s stance on monetary easing while a drop in crude oil prices dented demand for safe-haven bullion.
· Saudi Arabia sought to reassure markets after the attack on Saturday halved its crude oil output, saying full production would be restored by the month’s end.
· A risk-on sentiment in the market affects demand for bullion, often seen as an alternative investment during times of political and financial uncertainty.
Spot gold was barely changed at $1,502.62 per ounce as of 0529 GMT. U.S. gold futures were 0.2% lower at $1,510.40 per ounce.
· “If oil prices remain high, there would be inflation risks. Now oil prices have come off because they (Saudi Arabia) said they could restore production. Therefore, there is not such an inflation risk as before,” said Helen Lau, analyst, Argonaut Securities.
· However, investors are concerned this news could dissuade the U.S. Federal Reserve from further cutting interest rates, a negative for non-interest-yielding gold, she added.
Gold is considered a hedge against inflation.
· Economists and analysts widely expect the Fed to cut its benchmark rate for a second time this year to counter risks posed by the U.S.-China trade war.
· The chaotic moves in money markets and late-day swings in U.S. federal funds futures mean the CME’s tool shows about a 62% chance that the Fed will cut rates by 25 basis points on Wednesday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.13%, while the dollar against a basket of other currencies was little changed at 98.28.
· “The U.S. administration continues to have a problem, they want Iran to take responsibility. That is why gold prices are holding up quite well, “ Lau added.
Spot gold remains neutral in a range of $1,488-$1,523.61 per ounce, and an escape could suggest a direction, according to Reuters technical analyst Wang Tao.
· Also in focus is the Bank of Japan’s policy meeting due Thursday, where the central bank is expected to ease its policy this year.
· Jeffrey Gundlach, Wall Street's bond king and Founder and Chief Executive Officer of DoubleLine Capital, expressed his take on gold prices, given the recent surge.
Key Quotes (via Reuters):
-Repo market squeeze makes it even more likely that the Fed will resume expansion of its balance sheet 'pretty soon'.
-Federal Reserve will embark on 'QE lite, Fed will grow balance sheet 'in line with the growth in a currency like they did before the credit crisis'.
-'Less positive' on gold as a buying entry because of a recent rally.
-Chances of a US-China trade deal are 'below zero' ahead of the 2020 presidential election.
-The next big move in the US dollar is down.
· Among other precious metals, platinum dropped 0.2% to $941.08 per ounce, while silver eased 0.4% to $17.94 an ounce.
· Palladium dipped 0.3% to $1,593.74, on track for a fourth straight session of decline.
Reference: Reuters, FX Street
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