Gold Sells Off Modestly in Wake of FOMC Statement that Showed No Surprises

April 30, 2014

New York (Apr 30)  Gold prices were trading weaker in the aftermath of the latest monetary policy statement from the U.S. Federal Reserve. A weak near-term technical posture in gold allowed the bears to take control in afternoon trading Wednesday. However, losses in gold were limited by a lower U.S. dollar index and some safe-haven buying interest. June gold was last down $4.50 at $1,291.80 an ounce. Spot gold was last quoted down $4.00 at $1,292.50. May Comex silver last traded down $0.393 at $19.095 an ounce.

The Fed’s Open Market Committee (FOMC) once again tapered its monthly bond-buying program by $10 billion and did not say much new or different from the last meeting. The FOMC statement was pretty much a non-event for the market place as far as new revelations.

In other U.S. data Wednesday, the advance first-quarter GDP figure came in at up 0.1%, compared to forecasts for a gain of 1.1% in the period. The surprisingly weak number popped the gold market a few dollars and brought prices to near unchanged on the day, after trading moderately lower overnight. Two other U.S. data readings were a bit stronger than expected Wednesday, which did work to mitigate the GDP report.

In other 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.

Trader attention now turns to important manufacturing data coming out of China on Thursday.

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.

The London P.M. gold fixing is $1,288.50 versus the previous P.M. fixing of $1,297.75.

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