Gold gains ahead of Fed meeting statement, mixed U.S. data

Gold advanced on Wednesday ahead of the outcome of FOMCs two-day meeting, which should provide information whether the central bank will begin tapering its monetary easing program in the upcoming months or deceleration will be delayed. Gold also rose as the dollar was pressured by data and expectations for a slower U.S. economic growth in the second quarter.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at $1 333.25 per troy ounce at 8:22 GMT, up 0.64% on the day. Prices ranged between days low of $1 324.15 and high at $1 339.15 per ounce respectively. The precious metal settled 0.06% higher on Tuesday and is back on track to post a weekly gain, having advanced 0.02% so far this week after surging 3.8% in the last two.

According to analysts projections, a government report today will show Q2 GDP growth may have fallen to as much as 1.0% for the period April-June, down from 1.8% in the preceding quarter. Also later today, we’ll receive preliminary unemployment data prior to Friday’s Unemployment Rate and Non-Farm Payrolls. The ADP Employment Change is expected to remain flat at 188 000.

Initial Jobless Claims are due on Thursday and are expected to have risen by 1 000 to 344 000 in the week ending July 27.

On Friday, one of Fed’s main requirements to trim its monetary stimulus, the Unemployment Rate, is expected to have fallen to 7.5% in July, down from 7.6%, while Non-Farm Payrolls should have slipped by 10 000 to 185 000.

The Conference Board reported on Tuesday consumer confidence in the world’s biggest economy fell more than expected in July and stood at 80.3. The indicator was projected to plunge to 81.0 from June’s upwards revised reading of 82.1.

Following the overall controversial mixed U.S. data this week, the dollar swung between gains and losses and remained almost unchanged. The dollar index, which measures the greenbacks performance against a basket of six major peers, traded at 81.87 at 8:23 GMT on Wednesday, down 0.08% on the day. The September contract surged 0.16% on Tuesday and has so far advanced 0.1% on the week after falling more than 1.6% in the preceding two.

Market players remain cautious ahead of Feds meeting statement that will be released at 18:00 GMT. Gold’s price has largely been tracking shifting expectations of an earlier-than-expected deceleration of Fed’s monetary easing program. The metal is used mainly as a hedge against inflation, which accelerates when a central bank eases money supply. An exit from a program such as Quantitative Easing would deliver a heavy blow to gold’s price as its demand will crumble.

Steven Dooley, head of research at Forex Capital Trading Pty in Melbourne, said for Bloomberg: “Gold can move by $50 an ounce either way tonight, depending on what the Fed is going to say. What we are looking for is some kind of guidance on the Fed’s tapering. Other numbers like GDP or job data pale in comparison to the Fed.”

Market players will also be keeping an eye on other upcoming U.S. data to gauge the strength of the U.S. dollar. Apart from the employment data throughout the week, Personal Consumption Expenditures, Employment Cost Index and Chicago PMI will be released on Wednesday and Personal Income, Personal Spending, Average Hourly Earnings and Factory Orders are due on Friday.

Elsewhere on the precious metals market, silver, platinum and palladium are all following golds upward momentum. Silver for September delivery traded at $19.918 an ounce at 8:19 GMT, up 1.22% on the day. Prices ranged between days high and low of $19.968 and $19.685 per ounce respectively. Platinum October futures surged to $1 443.50 an ounce, marking a 0.42% daily gain. Futures held in range between $1 449.25 and $1 435.40. Meanwhile, palladium for September delivery stood at $737.60 an ounce at 8:18 GMT, up 1.23% for the day. Prices varied between days high and low at $738.80 and $728.40 a troy ounce respectively.