Gold Prices Firmer, Technical Resistance Ahead of Fed
Posted by Adam King on January 30, 2013
The price of gold on Wednesday awaited the outcome of the U.S. Federal Reserve’s monetary policy decision, with optimistic economic data and sentiment bolstering sentiment.
A statement from the central bank this morning is expected to confirm that it will stick with its monthly bond-buying program absent a drop in unemployment rates. The reaffirmation of the Fed’s policy will benefit the prices in the gold market.
In early trade on Wednesday, U.S. gold futures for April delivery gained $15.60, or 0.94 percent, to $1,678.30 per troy ounce. The spot price of gold gained $13.96, or 0.84 percent, to $1,677.85 per troy ounce.
Dan Smith, Standard Chartered analyst, said the Fed’s decision and statement are something people are looking at quite closely. He added the big challenge for gold is the impact a world economy recovery will have on prices.
Recent optimistic data implying steady economic improvements have led some domestic investors to shift into equities as a risk-on sentiment gained some traction.
Following today’s Fed announcement, investors will look toward nonfarm payrolls data on Friday for a better understanding of the U.S. labor market. Economists surveyed by Reuters expect a steady hiring rate by employers in January with unemployment changed from a month earlier at 7.8 percent.
Sharps Pixley writes policy makers’ caution towards the economy suggests that the stimulus measures are unlikely to be taken away anytime soon, which will support gold prices.
Gold analysts project the ultra-loose monetary policies adopted by central banks in the key economies are unlikely to change soon.
U.S. PGMs recycler A-1 said in a report the solid, albeit moderate, pace of growth of the U.S. economy and perhaps more importantly the likelihood of a re-emerging China could support continued advances in metals values through 2013.
Recent U.S. economic data show the economy unexpectedly shrank in the fourth quarter, boosting demand for the precious metals as a safe haven asset that brought gold prices to a two-week high. The gross domestic product, the volume of all goods and services produced, dropped at a 0.1 percent annual rate, a weaker level than any forecast in a Bloomberg survey and the worst performance since the second quarter of 2009, when many regard the world’s economy as still being in recession.
Economic uncertainty spurred by the recent economic report will reverse the risk-on sentiment as market participants realize a closer look at economic integrity and growth is important at this time. A move into gold and silver bullion to hedge the risk would be very appropriate.