The FOMC and Commodities

By FX Empire Analyst - Barry Norman
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Gold declined further after the Federal Reserve issued a policy statement that dashed investors hope for new monetary stimulus, even though it acknowledged that the US economy has lost momentum. The Fed kept its target rate between 0%-0.25percent and said it "will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

The Fed downgraded its economic outlook on US, but said it won’t add to stimulus measures and didn't make any changes to its key interest rate, low-rate pledge, or asset-buying plans.

Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,251.92 tons, as on July 31. Silver holdings of iShares silver trust, the largest ETF backed by the metal, increased to 9,708.77 tons, as on Aug 1.

The dollar index, which compares the US unit to a basket of other currencies, turned higher after manufacturing data in the U.S., rising to 82.714 from 82.705 on Tuesday.

Copper fell the most in more than a week, after reports showed weaker than expected manufacturing in China and the US, which raised concerns over the demand prospects in the world’s two biggest metals users. Copper futures for Sept. delivery closed down by 1.2% $3.375 per pound on the COMEX of the New York Mercantile Exchange.

Crude oil climbed after US crude inventories dropped the most in 7-months and the Federal Reserve said it may take steps to boost the economy.  Crude supplies fell by 6.5mn barrels to 373.6mn barrels, Gasoline supplies shrank by 2.2mn barrels to 207.9mn barrels while supplies of distillate fuel, which include diesel and heating oil, fell by 1mn barrels to 124.3mn barrels.

US refineries ran at 92.2% of total capacity on average, down 0.8 percentage point from the prior week, as per EIA.

South Africa has cut all crude oil imports from Iran in June, amid heavy European and US sanctions over Iran's nuclear program, a monthly government report showed.

Natural gas futures closed lower on more profit booking after setting a 7-1/2 month high in the previous session and reports that some private forecasters had moderated their mid-August temperature outlooks. Natural gas inventories are expected to increase by 23-25bn cubic feet, actual data will be released by EIA later in the day.

Today, the ECB will announce their policy decisions and key lending rate along with a roadmap on how the ECB will save the monetary union as promised by President Draghi of the ECB. A lack of follow through might upset markets and see prices tumbled.

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