Gold Drops Before Fed Meeting as Ukraine Crisis Assessed
London (Apr 29) Gold fell a second day, trimming a monthly rise, as investors assessed the outlook for further cuts to the U.S. stimulus program against the Ukraine crisis.
European shares rose with U.S. index futures before the Federal Reserve begins a two-day policy meeting. Gold declined from the highest price in almost two weeks yesterday after the U.S. and the European Union announced new sanctions on Russia, and Interfax reported that Russian troops engaged in exercises near the border with Ukraine returned to base.
The U.S. sanctions “were once again nothing but a slap on the wrist,” Naeem Aslam, chief market analyst at Ava Capital Markets Ltd. in Dublin, said in a report today. “For now, risk trade is back on. Gold is under pressure once again as the rewards are bigger for traders to invest that money in the equity markets, rather than keep shining the yellow metal.”
Bullion for immediate delivery fell 0.5 percent to $1,289.59 a metric ton by 10:24 a.m. in London. Prices are up 0.4 percent this month after dropping 3.2 percent in March, according to Bloomberg generic pricing. Gold for June delivery lost 0.7 percent to $1,289.70 an ounce on the Comex in New York, on trading volumes that were 18 percent lower than the average for the past 100 days for this time of day.
The Fed will probably trim its monthly asset purchases by another $10 billion to $45 billion at the meeting starting today, a Bloomberg News poll found. Reports tomorrow may show the U.S. economy grew 1.2 percent in the first quarter, while employers added 210,000 jobs in April, according to economists surveyed by Bloomberg.
QE Reduction
“Expectations are that QE reduction will continue and as such, the upside will probably be limited for the precious complex,” David Govett, head of precious metals at Marex Spectron Group in London, said in a report today, referring to quantitative easing. “We remain rangebound and in the absence of any news from Ukraine, prices will stay that way until various reports are released.”
Gold has advanced 7.3 percent this year, in part as the tension in Ukraine spurred haven demand. Holdings in the SPDR Gold Trust, the largest bullion-backed exchange-traded product, were unchanged for a fifth day yesterday at a 12-week low of 792.14 metric tons.
In China, volumes for the benchmark spot contract in Shanghai shrank for a second day yesterday after reaching a two-month high on April 24. Markets across Asia including those in China and India, the world’s largest bullion consumers, are closed for the Labor Day holiday on May 1.
Silver declined 1 percent to $19.3993 an ounce, heading for a second monthly loss. Platinum was at $1,413.44 an ounce from $1,418.63 yesterday, and is little changed this month. Palladium fell 0.5 percent to $797.63 an ounce to trim a third monthly gain, the longest such streak since January 2013.
