Gold remains weak on reducing need for easing in U.S.
Gold declined sharply yesterday during New York session after trading narrowly during the Asian and European session, affected sharply by the Minutes of the Federal Open Market Committee (FOMC), where the shiny metal lost momentum as the strengthening U.S. dollar forced downside pressures across the board, especially on commodities.
Yesterday, the U.S. dollar gained significantly after the Federal Reserve policy makers clarified in the Minutes that the U.S. economy is improving in a moderate pace. Therefore, the Minutes mentioned less need for new round of quantitative easing as the economy is growing in a moderate pace and since the bank already intended to leave rates at the virtual zero benchmark.
The clarification yesterday negated the effect of the comments provided by the Chairman last week, where Ben S. Bernanke explained earlier that the pace of recovery might not continue without new rounds of easing, the thing that sent the dollar south and supported markets to trade bullishly. However, the bank returns to negate this outlook after saying further stimuli will be seen just in case the economy lost momentum.
Gold shed so far 0.12% or $1.93 per ounce, trading now around $1644.20 per ounce compared with the day's opening of $1646.13 per ounce. The metal set so far the highest at $1648.28 and the lowest at $1641.15 per ounce.
With the start of the European session today the effect of the Minutes will continue, where the euro, the pound and other major currencies are expected lower against the U.S. dollar today, and in result gold might lose more momentum as investors will liquidate their gold positions in order to cover the losses across the board.
The effect of the Minutes will last till Europe starts to release critical fundamentals, including the performance of the services sector and also the spending levels in the euro-area region, but still the main focus will be on the ECB rate decision, with expectations the European Central Bank might leave rates again unchanged at 1.0%, as the bank fights higher inflation and attempts to boost growth at the same time.
The focus once again returns on the ADP employment change with the start of New York session, where eyes will then track whether the labor market continues the improvement or, as Bernanke clarified, further easing is needed to encourage the recovery to remain moderate.
The U.S. private sector could have added an additional 206 jobs this month compared with the previous addition of 216. This report will be closely watched as investors will track any improvement in this sector for signs what the jobs report might bring on Friday.
Gold might be volatile today, as the sentiment is expected to remain mixed and unclear, awaiting the critical ECB rate decision and the ADP employment report from the world's largest economy.
Among other precious metals, silver also declined today cutting so far 0.80% or $0.26 per ounce, trading now around $32.37 an ounce. The metal recorded a high of $32.70 and a low of $32.25 an ounce.
Platinum is trading now with 0.06% or $1.00 of losses around $1641.00 an ounce near the precious yellow metal, compared with the opening level of $1642.00. The metal reached the highest at $1646.88 and the lowest at $1637.75 per ounce.
Palladium declined as well cutting $1.63 or 0.25% to $652.25 per ounce, after recording the highest at $655.75 and the lowest at $649.75 per ounce, noting that the metal started the session at $653.88 per ounce.