AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.
5/1/2019: Gold slides after Fed meeting
Source: Bill Musgrave, American Gold Exchange
Austin — Gold dipped 0.1% to close under $1,288 on mixed data before the conclusion to the FOMC meeting on monetary policy. The metal then slid another $10 to $1,278 in electronic trade after Fed's upbeat post-meeting statement eroded hopes for an imminent rate cut.
The Fed kept benchmark interest rates unchanged, as widely expected, though it slightly trimmed the rate it pays banks for holding their excess reserves, a move that analysts view as a minor form of easing. The Fed's statement was upbeat, however, pointing to first-quarter growth of 3.2% and a recent dip in inflation as reasons to stay the course with policy.
Financial markets reacted with measured disappointment to the Fed's message. Traders were hoping for dovish signals that the central bank may cut rates this year to overcome recent stagnation, but none was forthcoming. The Dow and S&P 500 slid from slight gains to losses of 0.6% and 0.75%, respectively, after the statement.
The dollar, conversely, went from small losses to a gain of 0.1%, pressuring gold and other commodities. CME FedWatch raised the likelihood to 47% that rates will stay the same throughout this year, up from just 34% yesterday. Falling rates would weaken the dollar by making it less attractive to foreign exchange investors seeking yield.
Soft US data prevented gold from falling further. The ISM manufacturing index grew in April at the slowest pace since October 2016, a month before President Trump's election, reflecting a broad slowdown in a key segment of the economy. And construction spending plunged nearly 1% in March, far more than forecast, as the crucial housing market shows more signs of faltering.
On the plus side, ADP reported private sector payrolls increased by 275,000. The gains were mostly concentrated in the services sector.
The other precious metals were also lower, with silver dropping 1.7% while platinum and palladium lost 1.6% and 2.8%, respectively.
At the Comex close: June gold dipped $1.50 to $1,287.80; July silver dropped 25 cents to $14.73; July platinum lost $14.30 to $877.40; and June palladium shed $38.30 to $1,344.40 an ounce.
AGE Gold Commentary
Gold is climbing again, reacting to falling bond yields as the cost of money has become cheaper ... read more