Gold Weighed Down By Fed Speak

Gold Weigh Down By Fed Speak
Gold Weigh Down By Fed Speak

Gold continued to decline this morning dropping by $5 in the Asian session to trade at 1277.50. The precious metals complex is under pressure on account better than expected indicators out of the US. Though the US employment report showed less than expected jobs, the underlying factors point to continuing recovery. Also, recovering European economy reduces the need for further easing in the region in the near term. Gold slipped on US ISM services data and comments from FOMC’s Fisher that the tapering is near this sentiment has now been echoed by three Fed members as traders seem to be sure that tapering is imminent at the end of the summer.

Gold prices fell below the key $1,300 mark, as investors wrestled with uncertainty about the Federal Reserve’s timeline for reducing monetary stimulus. Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 915.04 tons, as on August 7. Silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,396.73 tons, as on Aug 2.

Recent reports show that China could overtake India as the world’s largest gold consumer as the country’s gold demand is expected to top 1000 tons this year. This increase in Chinese demand is coming at a time when India is putting excessive curbs on demand and supply of the yellow metal, in order to curb demand. An increase in Chinese demand is expected to be backed by rise in investment and jewelry demand. Last year, China’s demand for gold fabrication that goes into making of jewelry and other articles had touched 590.5 tons.

The dollar index, which tracks the US currency’s movement against six rivals, fell to 81.609 from 81.868 on Monday. The US dollar fell broadly against major currencies, as Federal Reserve officials hit the speaking circuit, adding to confusion about when the central bank could begin to slow its asset purchases. Charles Evans, president of the Chicago Fed Bank, said Tuesday the central bank is “quite likely” to begin stepping back its bond buys this year, adding that economic fundamentals are “actually really better.”

Traders can expect precious metals to trade lower on the back of weak global market sentiments. Additionally, declining trend in SPDR gold holdings will also exert downside pressure on prices. Further, strength in the DX will act as a negative factor.

Silver fell yesterday and again this morning to trade at 19.395 and continues on a negative bias as precious metals remain weak. Industrial metals prices rose yesterday, helped by a weak dollar and ahead of trade and industrial output data from China this week that should shed light on the outlook for demand from the top metals consumer. Copper rose near its two-week high in early trade session, as investors bet on stronger demand following more upbeat readings on global economic activity. Copper is trading at 3.157 easing this morning after yesterday’s gains. Copper prices closed slightly higher on the London Metal Exchange Tuesday, after a raft of positive economic data spurred investors to cut bets that prices would fall. 

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