Precious Metals Pressurized by FOMC Minutes

FXEmpire   |  February 22 2013 12:59 EST

By FXEmpire.com

Precious metals prices inched up yesterday, as lackluster U.S. data bolstered expectations that the Federal Reserve’s monetary stimulus would stay in place. Gold is trading this morning in the Asian session at 1582.70 gaining 4.10 today. Yesterday gold traded at 1575.00 regaining after two days of declines. Minutes from the US FOMC sent gold tumbling as the prospect of the Fed reducing or stopping its asset programs.

Weak economic data from euro zone as well as US for PMI and higher unemployment claims raised concerns for recovery in the region and supported gold prices. A lackluster recovery in the job markets and tepid growth can urge the Fed to continue with its stimulus package to support the economy and is likely to push gold prices up.

Gold prices are expected to go up as safe haven appeal of gold is likely to attract investors and support prices. Gold is poised for its third weekly decline on concern that the U.S. Fed Reserve will slow the pace of stimulus, spurring a plunge in asset holdings as the dollar surged to the highest level since September.

U.S. ETF investors’ five-month love affair with gold came to an abrupt end in January as they pulled $1 billion from the world’s largest bullion-backed exchange-traded fund to put into other commodity funds, data from funds tracker Lipper showed.

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange traded fund, stood at 1290.31 tons by Feb 21, down by 8.88 tons from the previous business day. While holdings in the world’s largest silver backed exchange-traded fund iShares Silver Trust stood at 10602.76 tons by Feb21, up by 63.15 tons from the previous business day.

Investors have turned to the U.S. dollar of late, which tends to depress the attractiveness of dollar-denominated commodities such as gold to holders of other currencies. Still, Friday saw the ICE dollar index, which measures the greenback against a basket of six other major currencies, turn down to 81.290, from 81.377 in late North American trading Thursday, and offering a bit of relief to metal investors. The upside is currently capped at $1,610. For now, the market will seek to consolidate near July lows, do not expect sustained losses past $1,550 in the longer term.

Industrial metals prices slid to its weakest in nearly two months yesterday on worries about a lack of demand from top consumer China, signs of slow growth in the Europe and the U.S., and concerns that the Federal Reserve may withdraw monetary stimulus.

Silver prices climbed a bit this morning to trade at 28.188 as traders took advantage of the weak commodity to buy it on the cheap. Markets are expected to self-correct after a harsh reaction to the FOMC minutes.

Click here a current Gold Chart.

Originally posted here