Gold futures headed lower on Wednesday after posting gains in each of the past four trading sessions, but some experts forecast a recovery for bullion prices as questions about the state of the economy and lofty stock-market valuations persist.
Commodity investors may gather more insights about the outlook for both after the Federal Reserve releases its account of its March policy meeting at 2 p.m. Eastern Time, about a half-hour after gold futures settle.
Market participants are looking for clues about the Fed’s view on inflation and the possibility that the central bank could soon reduce its market-stimulative bond-buying program as a first step toward normalizing monetary policy.
Gold prices on Tuesday marked a fourth consecutive gain, the longest such streak in about two months.
The precious metal “had a strong beginning to the week, more so because of the dollar weakening and making lower lows,” said James Hatzigiannis, chief market strategist at Ploutus Capital Advisors.
However, “without a definitive signal that U.S. lockdowns are coming to an end, I believe there will be no interest for precious metals,” he told MarketWatch, but if the economy shows signs of picking up, people will start spending more, boosting physical demand for gold.
“Some slight positives have been developing: encouraging economic numbers from China and the U.S. and we hope demand will pick up soon,” said Hatzigiannis. Without signals that lockdowns are coming to an end in China and the U.S., “gold will most likely just be coiling around at this level and everything else is just noise.”
June gold GCM21, -0.15% GC00, -0.15% on Comex was trading off $3.10, or 0.2%, at $1,739.90 an ounce on Comex after gaining 0.8% on Tuesday. May silver SIK21, -0.27% also fell by nearly 7 cents, or 0.3%, to $25.16 an ounce.
For now, gold is moving lower, partly due to a “lack of interest,” said Jeff Wright, chief investment officer at Wolfpack Capital. “Run away and non-targeted wasteful U.S. government spending could wreck the U.S. dollar and boost gold but to date, this is only theoretical not our market reality,” he said.
Some commodity experts, meanwhile, believe that gold’s moves may be limited if investors doubt that equity markets will continue to run to records.
“Market players believe that a large part of good news is already built into the equity market, and now perhaps could be the time for investors to take some breather,” writes Naeem Aslam, chief market analyst at AvaTrade in a note. That would favor investment in gold. “Concerns around inflation are real, and they are further fueling the momentum in the gold price,” Aslam said.
Rounding out action on Comex Wednesday, May copper HGK21, -1.20% fell by 1.2% to $4.07 a pound. July platinum PLN21, -0.23% traded at $1,241.40 an ounce, up less than 0.05%, while June palladium PAM21, -1.79% shed 1.8% to $2,642 an ounce.