Gold falls as FOMC winds up today
Washington (Apr 30) Gold is moderately lower in early U.S. dealings Wednesday. More chart-based selling pressure is featured. As long as the near-term chart postures for both gold and silver are bearish, the path of least resistance for prices will remain sideways to lower. It’s a big U.S. economic day Wednesday and traders are bracing for some higher volatility. June gold was last down $6.30 at $1,290.00 an ounce. Spot gold was last quoted down $5.60 at $1,290.75. May Comex silver last traded down $0.168 at $19.32 an ounce.
Wednesday is an extra important trading day. Not only is important U.S. economic data released, it’s also the last trading day of the month, which makes it a critical day from a technical perspective. Wednesday afternoon finds the results of the latest two-day FOMC meeting of the Federal Reserve. The FOMC is expected to continue to wind down its monthly bond-buying program, called tapering. Meantime, the gross domestic product and ADP national employment reports are also due out Wednesday. It’s setting up to be an active trading day in the markets.
In overnight news, inflation in the European Union picked up in April, which is a good thing, given the recent worries about deflation gripping the bloc. However, the rise was not as much as economists expected. EU consumer prices rose 0.7% year-on-year, up from the 0.5% rate reported for the same period in March. The data lands in the camp of monetary policy doves that want the European Central Bank to further stimulate its monetary policy.
The Russia-Ukraine crisis is still on the radar screen of the world market place. The matter has not de-escalated. This situation is likely to get worse before it gets any better. Gold and other safe-haven assets will likely at least see selling interest limited due to the instability in Ukraine.
Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the employment cost index, the Chicago ISM business survey, the weekly DOE energy stocks report and the U.S. Treasury’s quarterly refunding announcement.
As the calendar turns to May the old stock market adage comes to mind: “Sell in May and go away.” If this seasonal phenomenon holds true this year and U.S. stock indexes weaken in the coming months, such would be a bullish underlying factor for the raw commodity sector, including gold. Reason: Raw commodities are a competing asset class with equities. And recently, it’s the equities that have been the winner in the quest for investor monies.
