Economic data could mean volatility for Gold

UNITED STATES July 25 2017 10:28 AM
NEW YORK (Scrap Register): A U.S. Federal Open Market Committee meeting this week may not have much impact on gold and other markets, but there could be some volatility as a result of economic data, said Sean Lusk, director of commercial hedging with Walsh Trading. 

He noted gold just posted its biggest weekly gain in two months, helped by a stronger euro due to moves in bond yields and ongoing turmoil surrounding U.S. President Donald Trump. 

Traders will remain focused this week on political drama, which is nothing new. The major event, however, will be the Federal Reserve’s monetary policy meeting that is expected to be a relatively minor event due the fact there is zero expectation in the market for a change in rates.

As revealed in the May’s monetary policy meeting minutes, the central bank would look to reduce investments in Treasuries by $6 billion a month, increasing that level by $6 billion every three months until it reaches $30 billion. At the same time, it would reduce its holdings in mortgage-backed securities by $4 billion a month, raising the limit by $4 billion every three months until the amount reaches $20 billion.

Meanwhile, Lusk said, a full docket of economic data will help to create some volatility in markets. Key reports include housing sales – with existing-home sales data Monday and new home sales on Wednesday – plus consumer confidence on Tuesday and durable goods on Thursday. The second reading of second-quarter gross domestic product is due out on Friday. 

Technically, Lusk added, gold settled above a number of major moving averages last week, including the 50-, 100- and 200-day averages.