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Gold Prices Hold Above $1,500 Ahead of Fed Minutes, Powell

Investing.com - Gold prices traded lower on Wednesday as safe-haven demand faltered as risk appetite returned to markets ahead of the minutes from the last Federal Reserve meeting.

Spot gold fell $7.21, or 0.5%, to $1,500.20 a troy ounce by 7:41 AM ET (11:41 GMT), while Gold futures for December delivery on the Comex division of the New York Mercantile Exchange, lost $5.55, or 0.4%, to $1,510.15.

“Investors could remain on the sidelines ahead of the FOMC meeting minutes due for release later today,” analysts at Orbex said. “The initial panic following the 10 and 2-year yield curve inversion is also starting to fade as well, giving rise to risk appetite.”

Craig Erlam, market analyst at Oanda, said gold would likely be in “wait-and-see mode ahead of the two Fed events this week”.

Powell, under repeated pressure from U.S. President Donald Trump to do more to support the economy, is expected to provide an update on the outlook for monetary policy when he delivers a speech at Jackson Hole on Friday.

“The yellow metal has much more going for it and while more Fed easing will naturally be welcomed by gold bulls, record global negative yields and more easing on the horizon has left it in good shape,” Erlam said in a note.

Over $16 trillion in bonds worldwide offer negative yields currently, the latest being a new German 30-year bond, which was auctioned at an average yield of -0.11% earlier Wednesday. The bond was the first 30-year Germany has sold with a 0% coupon.

Erlam noted however that gold looked overbought and could be in for a correction.

“Any signal that a rate cut next month isn’t a foregone conclusion, or that (the Fed) may hold off, could be the catalyst for a broader pullback,” Erlam said.

Stephen Innes, managing partner at VM Markets, warned that recent rhetoric around pumping fiscal stimulus could also be negative for gold.

“A deluge of fiscal policy (stimulus) is widely believed to be one of the few if not only solutions that can stabilize bond yields which could hurt gold haven demand,” he said in a note.

In a landmark move Wednesday the German government decided to scrap the so-called Solidarity Surcharge on income tax for most of the population. The "Soli" had been introduced shortly after German reunification in 1990.

The news came a day after U.S. President Donald Trump confirmed that Washington was studying the possibility of tax cuts as well.

In other metals trading, silver futures fell 0.5% to $17.06 a troy ounce by 7:43 AM ET (11:43 GMT).

Palladium futures declined 0.6% to $1,481.20 an ounce, while sister metal platinum lost 0.5% to $848.90.

In base metals, copper inched up 0.1% to $2.580 a pound.

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