Gold Ignores the FOMC While the USD weakens

Markets are mixed on expectation from the US Federal Reserve, as the policy meeting will be held on Tuesday and Wednesday. It is anticipated that the US central bank will go to announce a monthly Bond purchasing scheme to inject more money into the market. As off now, the news about a drop in US unemployment rate and growth in china’s factory output and retail sales (US unemployment figures fell to a quadruple year low of 7.7 percent in November last week while the Chinese factory output and retail sales figures lifted to eight month highs) has already digested in the market, thus traders are keener to know the outcome form US Federal reserve meeting. The US Fiscal cliff issue keep traders  stressed along with the weekend announcement form the Italian Prime minister Mario Monti’ that he would resign by the end of the year.

Gold declined, marking their first fall in four trading sessions, as investors turned cautious ahead of a monetary-policy decision by the US Federal Reserve on late Wednesday.

Gold markets seem to be paying very little attention to the upcoming FOMC decision. Equities are soaring and the US dollar is weakening as traders are expecting Operation Twist to be replaced by a new Outright Bond Purchase Program and additional monetary easing adding close to 1 trillion US dollar to the balance sheet. Gold holdings  of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,351.42 tons, as on Dec 11. Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 9,829.15 tons, as on Dec. 5. Gold premiums in Hong Kong rose to their highest in about 5-months, as Chinese banks stocked up the bullion to avoid a supply crunch when refineries close shop for year-end holidays.

Reports yesterday showed that the U.S. trade deficit rose by 4.9 percent to $42.2 billion in the month of October as against $40.3 billion in the month of September. Exports of goods fell larger by 3.6 percent to $180.5 billion as compared to imports. Imports of goods declined 2.8 percent to $222.8 billion

US Dollar Index (DX) declined 0.4 percent earlier this week. The index traded in the negative territory due to rise in the risk appetite of the market participants on optimism that US Federal Reserve in its policy meeting today might announce stimulus package to boost the economy. Further, with rise in the German investor confidence strength in the Euro exerted downside pressure on the currency.  The US Fiscal Cliff continues to loom closer as President Obama continues to hold meeting and politicians assure markets that a deal was imminent, this morning rumors seemed to indicate that a deal would not be reached before Christmas, leaving lawmakers forced to return to work between holidays leaving traders little time to react to tax changes before year end.

Silver declined 0.8 percent this week taking cues from bearishness in the spot gold prices in most part of the trading session along with weakness in the base metals pack. Doubts amongst global market participants as to how the US law makers would solve the fiscal cliff issue also exerted downside pressure on the white metal. Weakness in the DX however cushioned fall in the silver prices in yesterday’s session.   The white metal touched an intra-day low of $ 32.74/oz. and closed at $32.9.