After increasing up to $1,354 an ounce yesterday due to rate cut expectations, gold prices hold steady on Wednesday ahead of Fed’s interest rate decision due to be announced later today while optimism that trade talks will resume between the US and China limits yellow metal’s upside movement. US President Donald Trump said yesterday that he would have a meeting with Chinese leader Xi Jinping at G20 while adding trade talks would resume ahead of the summit. Fed is not expected to change interest rates but economists see a likely sign for a rate cut possibly in July. By the way, Bloomberg reported that White House general counsel office found a way for demoting Fed Chair Jerome Powell who has been criticised frequently by President Trump for Fed’s monetary policy. In the meantime, Japan’s export declined for the sixth month consecutively in May.
Supported by trade disputes and worries on global economic growth alongside with expectations that Fed would cut the rates, gold prices held steady on Wednesday ahead of Fed’s interest rate decision.
As of 09:43 GMT+3, spot gold was trading at $1,345.07 an ounce while dollar index was at 97.62. US 10-year Treasury yield edged up to 2.061.
Federal Reserve will announce its interest rate decision and evaluate US economic outlook later today after two-day meeting. Fed is not expected to go for a rate cut but it will highly likely signal a rate cut which would possibly take place in July.
In addition to this, it was claimed that White House found a way to demote Fed President Jerome Powell who has been criticised often by President Donald Trump for Fed’s policies. Bloomberg reported that White House general counsel office prepared a report on how to legally demote Powell and make him just a Fed governor while Larry Kudlow did not deny the report but said it was an issue of six months ago and Trump had no such plan anymore.
In the meantime, optimism over trade relations between the US and China increased following Trump’s statements yesterday. Trump said he had a very good phone conversation with Chinese leader Xi Jinping and he would meet him at the end of the month at G20 in Japan. Trump said two sides’ officials would meet ahead of the summit and resume trade talks which stopped for a long while and this increased risk sentiment which limited yellow metal’s upside movement.
According to data released today, Japan’s exports declined for the sixth month in a row in May due to weakness in external demand. While imports declined by 1.5%, exports contracted by 7.8 in May. As an export-driven country which has been affected badly by trade war between the US and China, the contraction was due to weak shipment to China and this is expected to weigh on country’s growth performance.
Mitsubishi UFJ Morgan Stanley Securities senior economist Hiroshi Miyazaki said on Reuters that especially exporting firms’ business sentiment decreased due to trade war between the US and China while adding this would harm capital expenditure. Weakness in global demand is expected to continue posing risks to the world’s third biggest economy.