Thursday, April 9, 2015
Gold futures fell after the release of the FOMC minutes, which showed committee members split on the timetable for interest rate increases. Several Fed participants went on record saying that they expected economic metrics to warrant interest rate hikes as early as June. June was the original timetable many traders believed rates would be increased, before the March policy statement and subsequent statements from Fed Chairwoman Janet Yellen. The March policy statement was a bit more dovish than traders expected, but the minutes paint a different picture. This could be seen as Dollar positive and potentially negative for Gold prices.
Fundamentals
While the FOMC minutes were certainly viewed negatively by Gold traders, the metal is facing more pressure on the demand side. Physical demand from China, the world’s second largest consumer, has been very soft. There are simply too many other investment vehicles and Gold’s prospects do not look that enticing. Chinese equity prices have moved higher at a torrid pace and bond futures have recently become available in the country and can be seen as attractive, given the high likelihood that the People’s Bank of China will continue to inject liquidity. The deciding factor for Gold’s direction may be the US Dollar. Yesterday’s release of the FOMC minutes could embolden Dollar bulls and lead to the Dollar Index breaking and sustaining gains above the 100 mark. If this happens, Gold may continue to face downward pressure with occasional event driven buying from geopolitical events or Greece.
Technical Notes
Turning to the chart, we see the continuous Gold contract trading above the 1200 level for several sessions, before falling back in early trading this morning. Prices also broke and failed to hold the 50- and 100-day moving averages. The RSI indicator had previously given overbought readings, which could account for some of the recent weakness.
Rob Kurzatkowski, Senior Commodity Analyst
SOURCE: FuturesBlogs – Read entire story here.
