Gold price climbs as Fed policy statement looms
New York (July 27) Gold futures turned higher Wednesday after a report on factory orders came out weaker than expected, bolstering appetite for haven gold.
Orders for durable, or long-lasting, goods tumbled 4% in June, following a drop in the previous month and marking the biggest monthly decline in almost two years as U.S. manufacturers struggle to drum up sales.
Economists polled by MarketWatch had expected a seasonally adjusted 1.7% decline.
August gold GCQ6, +0.48% was trading higher, up $6.40, or 0.5%, at $1,327.20 an ounce.
Silver futures for September delivery SIU6, +1.86% gained 39.7 cents, or 2%, to $20.08 an ounce.
Among exchange-traded funds, the iShares Silver Trust SLV, +1.88% was up 1.9% and the SPDR Gold Trust ETF GLD, +0.60% was up 0.5%.
Both gold and silver finished higher Tuesday, but were trading lower Wednesday, before the durable-goods order report was released.
The weak economic data can be seen as providing the Federal Reserve less cause to lift interest rates from ultralow levels, which can make metals, which don’t offer a yield, more attractive to investors.
Economic reports mostly have been mixed to stronger-than-expected, highlighted by a recent jobs report that indicated that the U.S. added 287,000 jobs in June. However, that jobs report followed a May reading that represented the slowest employment growth in five years.
Market participants will be watching for the Fed’s latest policy decision due 2 p.m. Eastern Time Wednesday, about half an hour after futures for gold settle.
“Economic data are pulling in all directions right now—the perfect excuse for the Fed to sit on its hands yet again,” said Adrian Ash, head of research at BullionVault.
Since raising rates once back in December the Fed has kept interest rates steady, citing concerns about global growth and an uneven U.S. economic recovery.
“Flat interest rates don’t by themselves make a case for raising gold allocations, but the Fed’s inaction after its solitary hike of December 2015 is making investors increasingly nervous about growth and financial risk,” Ash said.
Although the U.S. central bank has adopted a fairly dovish stance and isn’t expected to raise benchmark interest rates, investors will be eager to glean clues from its statement about its outlook for the U.S. economy and therefore its plans for future policy.
“A hawkish view on U.S. interest rates will be bullish for gold and silver. However, if the Federal Reserve gives a negative outlook on U.S. economy, then gold will zoom,” said Chintan Karnani, chief market analyst at Insignia Consultants.
Strength in the dollar also has been a weight on gold, making the dollar-priced asset more expensive to buyers using other currencies. But the buck on Wednesday, as measured by the U.S. ICE Dollar Index DXY, +0.14% was relatively flat at 97.20, up less than 0.1%.
In other metals, high-grade copper for September delivery HGU6, -1.55% was off a penny, or 0.5%, at $2.22 a pound. October platinum PAV6, +0.00% was up $24.90, or 2.3%, at $1,123.90 an ounce, while September palladium PAU6, +0.97% was $8.45, or 1.2%, higher at $701.50 an ounce.