Gold Ends Higher, Gets Additional Boost After FOMC Minutes
NEW YORK (July 10) Gold futures prices ended the U.S. day session with slight gains Wednesday, but then rallied to near the daily high after the release of the U.S. Federal Reserve Open Market Committee meeting minutes. Gold saw a relief rally as the FOMC minutes contained no new, hawkish information. The key “outside markets” were also in a bullish posture for the precious metals on this day: a solidly lower U.S. dollar index and sharp price gains in crude oil futures. August gold was last up $16.70 at $1,262.50 an ounce. Spot gold was last quoted up $13.40 at $1,264.50. September Comex silver last traded up $0.232 at $19.37 an ounce.
The market place was just a bit surprised by the FOMC minutes reporting that around half of the 19 committee members are in favor of starting to wind down or “taper” its monthly bond-buying program, also known as quantitative easing, by the end of this year. While that could be read as somewhat more hawkish, the minutes also said most FOMC members want to see more economic data before making any firm conclusions on ending QE. The minutes mainly discussed how Fed Chairman Ben Bernanke should articulate the Fed’s monetary policy to the public. The consensus in the market place at present is that the Fed will start to cut back its bond purchases sometime later this year. Fed Chairman Ben Bernanke will also give a speech later Wednesday, which could also be market-sensitive.
China’s latest manufacturing report was released Wednesday and it came in on the weak side. Exports fell 3.1% in June, on an annualized basis. A 3.3% gain was expected. Chinese imports were down 0.7% on the year, while a 5.5% increase was forecast. The news had a somewhat limited impact on the market place, as the Chinese premiere said Wednesday China will continue on its path of long-term reform.
European stock markets were pressured Wednesday after the Standard & Poors ratings agency lowered Italy’s sovereign credit rating. The European Union’s sovereign debt crisis has been on the back burner of the market place for several months, but the situation has never been fully cleared up and could at any time heat up to roil world markets.
The U.S. dollar index was lower Wednesday on profit taking after hitting a three-year high on Tuesday. Still, the overall strong technical posture of the dollar index remains a major bearish underlying factor for the metals. Nymex crude oil prices were sharply higher Wednesday and hit a 14-month high overnight. With Nymex crude trading over $105 a barrel, that is a bullish underlying factor for the raw commodity sector, including the precious metals.
