Gold Trades Lower Ahead of Fed Meeting

 

Gold Trades Lower Ahead of Fed Meeting

(Bullion News Network) – Gold pulled back on Monday, logging its fourth consecutive daily loss ahead of a pivotal meeting of the Federal Reserve. Silver prices moved little on Monday, gaining less than 10 cents. On Wednesday, the FOMC will vote on whether or not to cut interest rates, which has become a contentious subject in American politics. U.S. President Donald Trump has repeatedly criticized Federal Reserve Chair Jerome Powell, imploring the economist to cut interest rates. The pressure appears to have done little to persuade Powell; analysts expect the Fed to keep interest rates unchanged heading into August. The price action favored silver, driving the gold-silver ratio lower to 86.66:1. 

Monday was notably absent of major economic reports, leading to only moderate gold losses ahead of a busy week of data. Tuesday will see the release of a fresh consumer confidence reading, which forecasters expect will increase from 93.0 to 95.4 as Americans’ inflation expectations continue to ease. On Wednesday, traders will have access to a fresh GDP reading, followed by an FOMC interest rate decision. Following the release of the Fed’s interest rate decision, Federal Reserve Chair Jerome Powell will address reporters in the post-meeting press conference. The decision, as well as Powell’s commentary, could have a major impact on markets. A fresh Personal Consumption Expenditures (PCE) index will be available on Thursday and could give traders more insight into where U.S. inflation is heading. On Friday, the July U.S. unemployment report is due; forecasters anticipate a drop in new jobs and a marginal increase in unemployment.

Forecasters expect few surprises during the Fed’s meeting on Wednesday. CME FedWatch projects only a 3.1% probability that the FOMC will vote to cut interest rates, down from 4.1% last week and 18.6% one week ago. Despite rumblings earlier this month, the Trump administration says that the president does not plan to fire Jerome Powell. American markets surged after Trump confirmed that Powell’s job is likely safe, but speculation surrounding interest rates remains a major factor in safe haven asset prices. Wall Street moved little today, with the S&P 500 and Nasdaq barely managing to eke out fresh records as traders await a fresh decision from the Federal Reserve. Similarly to the precious metals market, investors on Wall Street are likely waiting for more guidance and data before placing their bets. Luckily, several key data reports are scheduled for later this week, giving Wall Street – and gold bulls – quite a bit to consider heading into August. 

Market sentiment was largely unchanged Monday compared to Friday, according to CNN’s Fear and Greed Index. The index is set to close at a rating of 74, solidly in the “Greed” range. A new trade agreement between the United States and the European Union, announced on Monday, was well-received by markets. On the other hand, the trade deadline for dozens of countries is scheduled for Friday, August 1st. Depending on the status of trade negotiations heading deeper into this week, tariff jitters could lead to a resurgence in safe haven demand. 

Gold closed Monday down by just over $20. Silver gained less than $0.10, driving the gold-silver ratio 0.62:1 higher to 86.66:1. The Federal Reserve will meet on Wednesday to determine interest rates, which could impact safe haven demand.