Gold Treads Water Ahead of FOMC Decision
(Kitco News) - Gold prices are not far from unchanged and are just below the psychologically important $1,300.00 level in early U.S. trading Wednesday. August Comex gold futures were last down $0.60 an ounce at $1,298.80. July Comex silver was last up $0.069 at $16.96 an ounce.
The just-released U.S. producer price index for May came in at up 0.5%. The number was forecast to come in at up 0.3% from April. The markets did not show a big reaction to this report, but it does show inflationary pressures are on the rise.
Attention is on the Federal Reserve’s Open Market Committee (FOMC) meeting that began Tuesday and ends Wednesday afternoon with a statement. It is widely expected the FOMC will raise U.S. interest rates by 0.25% at this meeting. Fed Chair Jerome Powell will have a press conference following the meeting. Traders will parse Powell’s comments for clues on the pace of future U.S. rate hikes.
The European Central Bank holds its monetary policy meeting on Thursday. No change is expected in ECB policy, but the central bank is still on a path of easy money that is keeping its interest rates very low, and diverging with those of the U.S. More weak economic data coming out of the EU today—industrial production that fell more than expected—is another clue the ECB has to keep its monetary policy very accommodative. By the end of the year the spread between key U.S. and Euro zone interest rates is expected to be around 3.0%.
The key “outside markets” today find Nymex crude oil prices slightly lower and trading just above $66.00 a barrel. The International Energy Agency said world oil demand should remain strong in 2019, growing by 1.4 million barrels per day. Meantime, the U.S. dollar index is near steady early today.
U.S. economic data due for release Wednesday include the weekly MBA mortgage applications survey, the producer price index, the weekly DOE liquid energy stocks report, and the FOMC decision.
Technically, August gold bulls and bears are in a level overall near-term technical playing field. A seven-week-old downtrend on the daily bar chart has been negated. Gold bulls' next upside near-term price breakout objective is to produce a close above the May high of $1,332.40. Bears' next near-term downside price breakout objective is pushing prices below solid technical support at the May low of $1,286.80. First resistance is seen at this week’s high of $1,307.00 and then at last week’s high of $1,312.60. First support is seen at the Junes low of $1,293.10 and then at $1,286.70. Wyckoff's Market Rating: 5.0
July silver futures bulls have the overall near-term technical advantage as prices hit a six-week high on Tuesday. Silver bulls' next upside price breakout objective is closing prices above solid technical resistance at $17.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at the June low of $16.335. First resistance is seen at $17.00 and then at $17.11. Next support is seen at this week’s low of $16.77 and then at $16.645. Wyckoff's Market Rating: 6.0.