Anna Golubova Wednesday May 24, 2017 22:24
The FOMC meeting minutes showed that the widely expected June rate hike is not a sure thing yet, keeping gold above the $1,255 levels, one economist told Kitco News.
Gold is largely holding onto its post-Fed meeting minutes gains from the previous session, with spot gold on Kitco.com trading at $1256.50 at the time of publication.
“The minutes to some degree clouded the consensus view that a June interest rate hike is a done deal, which explains the strength in gold in the last 24 hours,” chief economist at ABC Bullion Jordan Eliseo said.
Despite a slight shift in expectations, the market still projects a rate hike at the next Federal Reserve meeting that is to take place on June 13-14, Eliseo explained.
“The market is still leaning towards a hike, which in effect is largely priced in. If they decide not to, gold will definitely get a short-term boost,” he added.
In fact, CME Group's FedWatch tool is currently showing market expectations for a June hike are 78.5%.
Gold levels are important to watch here, according to Eliseo, with the yellow metal needing to decisively break above the $1,260 range in order to move further up and test the critical $1,300 level.
In terms of support, Eliseo sees a break below $1,245 level opening the door for a re-test of the $1,220 range witnessed in early May.
The next big event for commodity traders to monitor is Thursday’s OPEC meeting.
“Crude has bounced substantially since early May, and it is worth watching if it breaks higher or lower from here. It is worth also keeping an eye on yields, with the US 10yr falling from 2.41% to 2.25% in the last two weeks,” Eliseo pointed out.
The U.S. President Donald Trump’s impact on gold prices, on the other hand, is waning, as markets are “bored” of accusations against Trump and would like to see some actual proof before reacting.
“Unless there is a genuine and undeniable ‘smoking gun’ event, rather than the innuendo and speculation we see every day right now, the issue is unlikely to move gold much this summer. Markets have largely moved on,” Eliseo said.