· Gold prices edged up on Wednesday, ahead of the U.S. Federal Reserve’s policy signals later in the day on reducing stimulus for the world’s largest economy.
· Spot gold rose 0.2% to $1,777.68 per ounce by 0356 GMT, while U.S. gold futures were flat at $1,778.00.
· In the absence of an official taper signal, gold could get some relief for the near term however the downtrend for the month would hold, DailyFX currency strategist Ilya Spivak said.
· Fed’s two-day meet is due to conclude on Wednesday as investors focus on any new signals on when a taper may begin. The U.S. central bank is also likely to provide an outlook on interest rate hikes from the current near zero level.
· Wednesday’s statement will also offer Fed’s rate projections for 2024 for the first time.
· “If it looks like over the course of the coming years, basically through the end of 2024, the Fed envisions more than 100 basis points in cumulative rate hikes that would be hawkish, and a negative catalyst for gold,” Spivak said.
· An eventual interest rate hike would raise the opportunity cost of holding the non-interest bearing gold.
· Stocks found support after debt-laden property developer China Evergrande said it would pay some bond interest due on Thursday, though investors stayed nervous.
· Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.1% to 1,000.79 tonnes on Tuesday from 1,001.66 tonnes on Monday.
· Gold Price Forecast: XAU/USD cheers China-led risk-on mood on the way to $1,800, focus on Fed
While headlines concerning China and Evergrande may entertain gold traders, markets may witness sluggish moves ahead of the Fed decision.
Gold (XAU/USD) bulls take a breather around $1,775, following a three-day uptrend during the key Wednesday’s Asian session. In doing so, the metal fades bounce off the mid-August levels while trading sideways of late.
Markets turn cautious, mostly inactive, as the Federal Reserve (Fed) prepares for the Federal Open Market Committee (FOMC) monetary policy meeting announcement. Recently mixed data contrasts the Fed policymakers’ hawkish bias to confuse traders. Goldman Sachs recently backed the Fed tapering announcement and challenged the gold buyers. On the same line could be firmer US housing market data, namely Housing Starts and Building Permits for August, which backed hopes of hearing the word taper from the US Fed in Wednesday’s meeting.
Moving on, monetary policy decisions from the People’s Bank of China (PBOC) and the Bank of Japan (BOJ) may entertain gold traders, as well as chatters relating to Evergrande. However, the Fed decision will be crucial for gold traders. Should the US central bank hint at tapering, gold prices may have to bear the burden of the likely US dollar upside.
Technical analysis
Not only a failure to cross the horizontal area from late August, around $1,780-82, but bearish MACD signals also keep gold sellers hopeful.
Even if the metal crosses the $1,782 hurdle, a downward sloping trend line from September 03, near $1,789, precedes a convergence of 20 and 50 DMAs close to $1,795 to challenge the gold bulls.
Additionally, 200-DMA and the famous double tops, respectively around $1,807 and $1,834, act as extra hurdles to the north.
On the contrary, the latest swing lows around $1,742 and August 10 bottom close to $1,717 may lure the gold sellers during fresh downside.
However, the $1,700 threshold and the yearly low of $1,687 may restrict the metal’s weakness afterward.
Overall, gold had many challenges to sustain before convincing the bulls.
· Silver climbed 1.4% to $22.78 per ounce, while palladium gained 0.9% to $1,923.74.
· Platinum rose 0.3% to $956.61. Prices rose 4.7% on Tuesday, its biggest one-day gain since Feb. 10.
· METALS-London copper rebounds as Evergrande worries fade
London copper prices advanced on Wednesday, driven by easing default fears around property giant China Evergrande after its main unit said it would to pay some bond interest due later this week.
Three-month copper on the London Metal Exchange rose 3.1% to $9,255 a tonne by 0524 GMT, reversing losses from the previous session when the contract went as low as $8,810 a tonne, its weakest since Aug. 19.
Risk sentiment was also supported by the People’s Bank of China injecting more liquidity into the market to replace certain expiring loans.
· Fed likely to open bond-buying 'taper' door, but hedge on outlook
The Federal Reserve is expected to clear the way on Wednesday for reductions to its monthly asset purchases later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.
· Germany's Ifo institute cuts 2021 GDP growth forecast to 2.5%
Germany’s Ifo economic institute said on Wednesday it cut its growth forecast for Europe’s largest economy for this year as supply chain disruptions and scarcity of intermediate goods are slowing down the recovery from the COVID-19 pandemic.
The Ifo institute now sees Germany’s gross domestic product (GDP) to grow 2.5% this year, down 0.8% percentage points from its previous forecast, and 5.1% next year, up 0.8% points.
· Australia says trade pact would benefit EU in Indo-Pacific amid submarine deal fallout
An Australian-EU trade deal would be mutually beneficial and allow EU members a greater presence in the Indo-Pacific, said Australia's trade minister, as Canberra tries to repair ties with Paris after the scrapping of a $40 billion submarine deal.
Australia last week cancelled a deal with France's Naval Group to build a fleet of conventional submarines and will instead build at least eight nuclear-powered submarines with U.S. and British technology after striking a trilateral security partnership with those two countries.
· China keeps lending benchmark LPR unchanged for 17th straight month
The one-year loan prime rate (LPR) was kept at 3.85%. The five-year LPR remained at 4.65%.
· China's high-tech push seeks to reassert global factory dominance
· Evergrande crisis will hurt China’s economic growth, says former central bank advisor
· Bank of Japan holds steady on policy, offers bleaker view on exports, output
· BOJ’s Kuroda: Household spending remains weak due to coronavirus measures
· Top U.S. trade official to have meeting with WTO chief on Wednesday
· India slams UK’s new travel rules as ‘discriminatory,’ warns of retaliation
The U.K. last week announced that fully vaccinated individuals from a list of 17 countries and territories will not have to quarantine upon arrival in England.
The British government will next month allow fully vaccinated travelers from a list of countries to skip quarantine upon arrival — but Indians who are fully vaccinated will still need to be quarantined.
· COVID-19 sends northern Chinese city into semi-shutdown
· Locked-down Melbourne tightens security for COVID-19 protests
Police fanned out across the centre of Australia's second-largest city of Melbourne on Wednesday in a bid to keep a lid on a third day of protests over COVID-19 lockdown curbs, as the state of Victoria recorded another rise in infections.
Reference: Reuters, CNBC, FXStreet
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