Gold and silver managed to rally on Monday, erasing some of their losses from a large selloff at the end of last week before the Federal Reserve begins its two-day monetary policy conclave. Spot gold was down 0.2 percent at $1,234.81 an ounce at 0930 GMT, while US gold futures for June delivery were down $3.60 at $1,236.60.
Advertisement
“A lot of people really are fed up with dollar trades”, Elsa Lignos, a senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in NY, said in an interview on Bloomberg Television.
Higher U.S. interest rates are supportive to the greenback, but can make gold more expensive for those buying the dollar-denominated assets using other currencies.
Silver has leveled off since hitting a yearly high last week. “Inaction at the April meeting without strong assurances of further easing could be interpreted by the market as a confirmation that the BOJ has de-prioritised the exchange rate ahead of the G7 summit in May”. The net long positions by speculators in gold increased by 3,030 contracts to 21,680 contracts. The rise in silver prices is also crossing over to mining companies, which are also having a superb year thus far (SEE: A look at gold, silver stocks soaring as high as 17% Monday).
“We think risks are rising for the Fed to maintain a dovish view, and that’s going to set quite a positive background for gold prices”, she said.
Advertisement
But interest rate futures show less conviction, underscoring the wide gap between markets and policymakers on the path of rates. Supporting gold, the dollar came under pressure from a recovery in the beleaguered yen as prospects of more monetary stimulus from the Bank of Japan remained unclear. The Fed is expected to hold interest rates steady at the meeting starting on Tuesday, but traders will be watching for changes to its assessement of the USA economy, which could point to more rate increases later in the year. “If gold stays relatively range bound at $1,250/oz, a silver rerating to 66.6 (the average 1983 – 2003), the silver could trade up to $18.8/oz, and a silver rerating to 61.1 (the average since 2003), then silver could trade as high as $20.5/oz”. July platinum PLN6, -0.19% fell $12.40, or 1.2%, to $1,006.10 an ounce, while June palladium PAM6, -0.57% shed $11.55, or 1.9%, to $594.05 an ounce.
