Gold Steady Under $1,615 for ECB, FED Posted by James Randolph on August 01, 2012
August 1, 2012 – The spot price of gold held just under $1,615 per troy ounce Wednesday, moving in line with stocks and the dollar, as markets anticipated the conclusion of key monetary policy meetings of the US and Eurozone central banks.
The Federal Reserve may hint at more stimulus at the conclusion of its two-day
meeting on Wednesday, which would be beneficial for the gold market. Some analysts
expect stimulus because recent mixed economic data can be read as a signal the economy
needs a boost, long-term interest rates need to be maintained a low level, and the dollar
has been a little too strong in currency markets.
Major news is not expected from the Fed until later in the year, according to
Reuters, but investors see the European Central Bank as primed for an announcement of
some kind following last week’s statement by Mario Draghi, ECB president, who said he
would do anything necessary to help the euro.
The spot price of gold was up 0.1 percent at $1,613.89 per troy ounce and US
gold futures for August delivery were up $2.90 per ounce to $1,617.50. Ahead of the Fed
and the ECB meetings, the rally that brought the metal to the highest levels seen since
June has taken a hiatus.
Afshin Nabavi, head of trading at MKS Finance in Geneva notes that it’s quiet on
all fronts in anticipation of the Fed and ECB. Gold did give back some of its gains from
the previous day, but maintained a range between $1,600 and $1,630. Nabavi sees a break
about $1,635 opening up the path for a move toward $1,700 per troy ounce, but it will
most likely occur after the Fed and ECB meetings, the outcome of the FOMC meeting
being today’s highlight.
The euro and European stocks shaved gains on Wednesday as Bund futures
increased on renewed speculation the ECB may not have the resources or breadth
necessary for further measures in the region’s debt crisis.
The euro is down almost 5 percent against the dollar so far in the year, battered
by the continuing debt crisis, which has prompted Portugal, Ireland, and Greece to take
international aid while the cost of borrowing has skyrocketed in Spain.
Ahead of Thursday’s ECB meeting, the US has urged the Eurozone’s leaders to
take more decisive action in order to solve the regional debt crisis, particularly by the
lowering of the cost of borrowing for troubled members.
US Treasury Secretary Timothy Geithner said in an interview on Tuesday that
banking systems in the Eurozone must make sure they can provide credit while lowering