Metals Stocks: Gold prices under pressure as markets digest report on experimental coronavirus treatment, await Fed update

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Gold futures were edging lower Wednesday morning as investors awaited the outcome of a policy update from the Federal Reserve following a litany of emergency measures and programs intended to quell the devastating impacts of the COVID-19 pandemic.

Meanwhile, a report indicating that Gilead Sciences’s experimental treatment for the illness derived from the novel strain of coronavirus achieved some success in a government-run clinical trial evaluating remdesivir in certain COVID-19 patients.

That report came as a first reading of the official scorecard of U.S. economic activity, gross domestic product, in the first quarter, fell 4.8% on an annualized basis, highlighted the effects of the virus so far.

Gold for June delivery GCM20, -0.28% on Comex fell $6.30, or 0.3%, at $1,715.90 an ounce, after shedding 0.09% on Tuesday, while July silver SIN20, +1.09%, which is now the most-active contract, picked up 14 cents, or 0.9%, to $15.47 an ounce, following a drop of less than 0.1% in the previous session.

Commodity experts have been watching for a treatment or a vaccine for the deadly contagion, which could undercut appetite for havens and support hopes of mitigating the impact of the virus.

Later in the day, the Fed will stay in focus as investors await its update at 2 p.m. ET, followed by a virtual news conference hosted by Fed Chairman Jerome Powell to discuss the policy maker’s decisions.

The central bank has already exceeded its rescue effort in the 2008 financial crisis to soften the blow of the pandemic, pushing its balance sheet to a record $6.6 trillion as of last week’s count, and Powell is expected to reinforce the message the Fed stands ready to “aggressively” do more, if necessary.

Commodity traders and others might look for more guidance from the Federal Open Market Committee on the prospects for a wider breath of actions, including purchasing equities, and whether the central bank may venture into uncharted territory: taking its policy interest rate that presently stand at a range between 0% and 0.25% to subzero.

The actions thus far by the Fed, and other monetary-policy makers, including the European Central Bank which convenes on Thursday, has helped to bolster prices for precious metals.

“The volatility in gold prices is likely to spike when the Fed will declare its monetary policy decision and most of the bets are in favour of higher gold prices” wrote Naeem Aslam, chief market analyst at AvaTrade in a daily research note.

So far, however, gold has been mostly trading in a range, gold bulls are expecting it to possibly break out of that trend as data underlines the hard slog ahead for economies attempting to re-emerge from coronavirus-induced shutdowns.

Craig Erlam, senior market analyst at Oanda, said that “for now [gold] seems caught in two minds. $1,660 is the level to watch below and $1,750 above but the walls may be closing in,” he said.

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