Gold Hits one week High Ahead of FOMC Update

Gold prices eased on Wednesday after touching a one-week high earlier in the day, as the dollar recovered some ground lost to U.S. President Donald Trump’s criticism of the Federal Reserve’s interest rate hikes. Minutes from the Fed’s July 31-Aug 1 policy meeting are expected later on Wednesday, which investors will study for clues on further rate hikes in the United States.

Spot gold XAUUSD gained 0.36% to $1,200.1 an ounce, after earlier hitting $1,197.66, its highest level since Aug. 14. U.S. gold futures GCcv1 were largely unchanged at $1,200 an ounce. The dollar index against a basket of six major currencies DXY was marginally higher at 95.284, after having fallen to a nearly two-week low of 95.08 in the previous session. It appears, for now at least, gold has reached a trough, and will gradually strengthen as the recent comments by President Trump attacking the Fed’s policy of raising rates would only benefit gold. Not adopting a tighter monetary stance might rekindle inflationary pressures, which should boost gold.

Trade War Fear Rise Over President Trump’s Comments

Market is also looking for update on Sino-U.S trade-related talks as trade war fear is on rise post trump’s statement blaming Europe & China of currency manipulation and commenting that the talk between US & China would not be fruitful while also mentioning 25% tariff on Europe yesterday night all of which is greatly pressuring US Greenback in broad market ahead of US FOMC update. USD might get a breather in case FOMC update comes out on a highly hawkish note. Spot silver took a bearish dip during late American market hours but has rebounded since and is trading near flat at $14.80 an ounce up 0.06% on the day.

Oil markets rose on Wednesday on a drop in US crude inventories and a weaker dollar, while concerns about a potential shortfall in Iranian supply from November due to US sanctions also buoyed prices. Signs of slowing US crude output growth and a weaker US dollar also provided some support to oil prices, a weaker US dollar makes oil, which is priced in dollars, less expensive for buyers in other currencies.

The EIA cut its 2018 US crude production growth forecast on Aug. 7 to 10.68 million barrels per day (bpd) from 10.79 million bpd amid lower crude prices. Concerns also remain over how much oil will be removed from global markets by renewed sanctions on Iran, despite worries that demand-growth could weaken amid a trade dispute between the United States and China, the world’s two biggest economies. Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC) and OPEC’s third-largest oil producer, said earlier this week no other OPEC member should be allowed to take over its share of oil exports. Spot Crude WTIUSD is trading at $67.31/b up 0.60% on the day.