Gold price falls amid Fed statement release
San Francisco (Apr 29) Gold fell on Wednesday after the Federal Reserve released a statement in which it removed all calendar references to an rate increase.
Following through on indications in March, the Federal Open Market Committee on Wednesday offered no changes to its zero interest rate policy.
Not only did it hike rates, it also removed all hints for what may lie ahead. Calendar references were removed completely from the post-meeting statement.
The FOMC indicated after its March meeting that a rate hike in April was unlikely. The U.S. central bank has kept its key funds rate anchored near zero since late-2008 to spark the economy during the financial crisis.
Spot gold was lower at $1,202.89 an ounce. It had gained nearly 3 percent in the last two sessions, climbing to a three-week high of $1,215 on Tuesday.
U.S. gold futures for June delivery closed down $3.90 an ounce to $1,210, after rising to their highest level since April 7 in the previous session.
"Gold has benefited from a short-covering rally, which has not been significant to push it into new highs because it was not based on real buying but dollar strength," bullion broker Sharps Pixley CEO Ross Norman said.
Bullion has been boosted in recent days after a string of U.S. data weakened the dollar and hinted at slowing momentum in the world's largest economy.
However, data showing that U.S. gross domestic product expanded at an only 0.2 percent annual rate, the weakest reading in a year, did little to help gold on Wednesday.
The dollar hit a two-month low against a basket of major currencies, as the market hedged the risk that the Fed might adopt a more dovish tone in its statement following the two-day policy review due later on Wednesday.
Investors will also get an early read of how the U.S. economy fared in the first quarter with GDP data due to be released just hours before the Fed statement.
A softer dollar should boost gold, as it makes it cheaper for holders of other currencies. Traders remain however cautious as they expect the U.S. economy will eventually improve and the Fed will start tightening its interest rate cycle at some point, denting the investment appeal of gold, a non-interest bearing asset.
"Beyond the short term, we struggle to see solid support from fundamentals ... so despite this potential delay by the Fed people are not rushing into gold," Julius Baer analyst Carsten Menke said.
Higher gold prices have also dampened Asian physical demand.
In China, the second biggest gold consumer, premiums eased to about $1 an ounce on Wednesday over the global benchmark, from $2-$3 in the previous session.
Silver was unchanged at $16.59 an ounce. Platinum was down 0.1 percent at $1,155 an ounce, while palladium dropped 0.2 percent to $774.22 an ounce.
Source: CNBC
