Gold pares gains after Fed leaves door open to June rate hike

28 April 2016, 06:55
Anton Hernawan
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Gold rose for a third straight session on Wednesday, but pared gains after the U.S. Federal Reserve held interest rates unchanged but left the door ajar to a hike in June. The U.S. central bank's policy-setting committee said the labor market had improved further despite a recent economic slowdown and that it was keeping a close eye on inflation. Spot gold was up 0.3 percent at $1,246.65 an ounce at 2:44 p.m. EDT (1844 GMT). U.S. gold futures for April delivery settled up 0.6 percent at $1,249.20 an ounce prior to the Fed's statement. The Fed had been widely expected to keep interest rates steady this month, with focus resting squarely on the tone of its statement and any hints on the timing of any future increases. The U.S. central bank raised rates in December for the first time in nearly a decade. "By de-emphasizing global risks but acknowledging slower growth, the FOMC executed an equivocal pirouette that keeps a June/July move open but only just," said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York. "Gold has traded in a choppy $10 range but ultimately the FOMC has not impaired the constructive sentiment in gold and silver." Gold was firm ahead of the Fed statement, with data showing orders for long-lasting U.S. manufactured goods rebounded far less than expected in March. "The Fed cited the moderation in consumption and softness in exports and investment spending, which in our view positions them to wait until September for enough signs that at least consumption is turning firmer," said Avery Shenfeld, chief economist for CIBC Capital Markets. "Overall, not really much for markets to chew on in this, with forecasters likely to stick to their guns on whatever they were calling for prior to the statement." Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced. A slump in demand from key Asian consumers is likely to push gold prices lower in the short term, GFMS analysts at Thomson Reuters said in a report on Tuesday. Among other precious metals, silver rose 0.7 percent to $17.28 an ounce, platinum added 1.3 percent to $1,020.99 and palladium was up 1.5 percent at $609.71
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