• Gold edged lower on Thursday as investors awaited cues on market direction amid a number of geopolitical events later in the day that could boost the safe-haven demand for the metal.
• Polls open in the UK national elections later on Thursday while the European Central Bank (ECB) may discuss dropping additional stimulus pledges at a meeting later and former United States Federal Bureau of Investigation director James Comey will testify before the U.S. Congress about his interactions with President Donald Trump later in the day.
• "A lot of things are happening at the same time... There may be some kind of impact that may push up the volatility rather than the direction of price moves," said Mark To, head of research at Hong Kong's Wing Fung Financial Group.
• "Gold is likely to fluctuate somewhere between the $1,280-$1,300 range," he said
• Spot gold was down 0.2 percent, to $1,284.24 per ounce at 0439 GMT.
• The yellow metal fell from a near seven-month high on Wednesday after Comey's written testimony to the U.S. Senate contained few surprises.
• Comey's testimony did say President Trump asked him to drop an investigation of former national security adviser Michael Flynn as part of a probe into Russia's alleged meddling in the 2016 presidential election.
• However, uncertainty surrounding the UK poll, which Prime Minister Theresa May called for to strengthen her hand in looming Brexit talks, kept bullion's losses in check.
• A final flurry of opinion polls gave May's Conservative Party a lead between 5 and 12 percentage points over the main opposition Labour Party, suggesting she would increase her majority - but not win the landslide foreseen when she called the election seven weeks ago.
• "At these levels, gold may already have a lot of today's event risk built into its price," said Jeffrey Halley, senior market analyst at OANDA.
"That said, with the (UK poll) results coming out during the Asian session tomorrow morning, the downside for gold is likely to be limited as we run into the weekend," he said.
• Meanwhile, the ECB is likely to keep its easy monetary policy during its meeting as inflation remains below its target despite stronger economic growth in the euro zone. However, some policymakers may take a better view of the economy and drop some pledged to ramp up stimulus.
• In other precious metals, silver rose 0.2 percent to $17.59.
• Next week’s Fed meeting has a far bigger importance for gold than any other event this week, Weston said.
• The market is currently pricing in well above 90% probability of a rate hike during the two-day monetary policy meeting on June 13-14.
• “We’ve got very predictable central bank policy. And the Fed doesn’t like to surprise the market these days,” Weston noted.
• Some of the important things to look at in the Fed statement include the central bank’s growth and inflation forecasts.
• “We are going through a weak period of U.S. growth and the Fed has classified it as transitory, and now they’ve got a chance to show how that soft data affects their views. And there is a decent chance we will get core inflation taken down from the current expectations of 1.9% to 1.7%,” Weston explained. “How certain is the Fed that this period of soft data is transitory and are we going to have a spring back to 2.5%-3% growth in the Q2? If we are going to see a real determination, that could be bad for gold.”
• The other key thing to keep an eye on is the “normalization" of the Fed’s $4.5 trillion balance sheet. The Fed already talked more openly in the minutes about using its balance sheet.
• “In September, the Fed could announce a more effective use of their balance sheet and allow it to run off in October meeting,” the IG analyst pointed out.
• Weston currently projects a rate hike in June and then another one in December, but the latter one is not certain at this point.
• When answering a question if gold could finally break above the key psychological $1,300 level this summer, Weston said: “If you want to be bullish on gold, you need to be bearish on the U.S. economy and not see the signs of the turnaround most people expect.”
• “I don’t think any of these events will have a huge bearing on gold. The gold market is cuing off more U.S.-centric pricing mechanisms. If the ECB does disappoint to an extent, then you could see the euro fall, which could be positive for the dollar index, and gold could come off a few bucks. But, I don’t expect gold to have a big move on the ECB,” Chris Weston, chief market strategist at IG in Australia, told Kitco News in a telephone interview.
• In terms of the U.K. general election, Weston doesn’t see it as a big gold mover either. “The election is going to be fairly well contained within the U.K. assets — pound will be very sensitive,” he said.
• Instead, Weston is monitoring two other things that he believes have a high impact on gold prices — inflation-adjusted bond yields (there is a very strong correlation between them and gold prices) and next week’s Fed meeting.
• Overall, Weston is positive on gold at the moment. “I’ve got an optimistic bias on gold, a progressively cautious one. It will turn out to be an outright bullish bias on gold if we could close above $1,295, which was, of course, the April high. We had a test of $1,295, we rejected that level and now we need to see a closing break. Otherwise, the markets will roll back to $1,260-$1,250 in the short to medium term.
Reference: Kitco,Reuters
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