On Monday, gold futures were lower in European trade, actually falling for the second straight session, as the U.S. dollar recovered from the losses suffered in the wake of the Federal Reserve’s dovish statement.
The dollar had kept recovering from five-month lows as investors closed out bearish bets after an aggressive selloff last week.
The US dollar index, measuring greenback’s strength against a trade-weighted basket of six major currencies, added 0.2% to a total of 95.27, going away from the five-month low of 94.61.
Even with the recent losses, gold prices are up almost 16% so far this year. Investors look for safe havens in the midst of growing instability in other financial markets, and fears over a China-led global economic slowdown make it harder for the Fed to raise rates.
Rate hike projections are down
The US central bank astounded markets last week when it cut its rate hike projections more than expected. Now it’s down from four to two, referencing the possible impact from weaker global growth and financial market turmoil in the U.S. economy.
Economists and investors adjusted their own rate hike outlooks in the wake of the Fed’s unexpectedly dovish statement, and now interest-rate futures traders will see no rate rise before September. A slow and steady path to higher rates is seen as less threatening to gold prices than a number of swift increases.
What to look for
In the upcoming weeks, market players will be focusing their attention on Friday’s final reading on the US’s fourth quarter gross domestic product for a fresh indication of the economy’s strength.
Reports on US home sales and durable goods orders will be of great interest to investors attempting to gauge if the world’s largest economy has the strength to withstand further rate hikes during 2016.
Investors will be listening carefully to a number of speeches from the key Fed officials this week, including Dennis Lockhart, James Bullard, Jeffrey Lacker, Patrick Harker, and Charles Evans.
Also on the Comex, silver futures for May delivery declined by 0.58% (9.1 cents), to trade at $15.72 a troy ounce during morning hours in London, while copper futures dropped 0.46% (1.1 cents) to $2.272 a pound.
A stronger greenback usually weighs on commodities traded in dollars by making them more costly for non-US buyers.