March 21, 2017
Gold slips on technical selling; Fed stance caps fall
(Reuters) - Gold prices edged down on Tuesday as it failed to break a key resistance, but held near two-week highs hit in the previous session after the Chicago Federal Reserve's president said the U.S. central bank would not rush to hike interest rates.
The Fed will likely wait at least until June policy meeting to decide whether to lift U.S. interest rates again, Chicago Fed President Charles Evans said on Monday. Spot gold XAU edged down 0.5 percent at $1,227.50 per ounce by 0315 GMT. On Monday, it touched its strongest since March 6 at $1,235.50. U.S. gold futures <GCcv1> fell 0.5 percent to $1,228. "What we are seeing is a bit of washout in short-term positioning as gold is unable to surpass the strong resistanceat $1,237," said Jeffrey Halley, senior market analyst at OANDA. "But, there is no other way than looking bullish at gold for the moment. There are extended positions in dollar. We are going to see this dollar correction running for a while, which will support gold."Spot gold is expected to drop to $1,221 per ounce, following its failure to break a resistance at $1,237, accordingt o Reuters technical analyst Wang Tao.
The dollar index DXY, which measures the greenback against a basket of currencies, was down 0.2 percent at 100.190.
The lack of a concrete policy from U.S. President Donald Trump's administration is worrying investors and more people will opt for gold when the stock markets go lower, analysts and traders said.
Expectations that the Fed will have to step up rate hikes to counter inflationary pressure from Trump's stimulus are also waning after the central bank dropped no hints of an acceleration in credit tightening last week. Fed's Evans, in one of the first official comments after the Fed raised rates, said the U.S. central bank needs time to digest economic and financial market data as well as any clarity on the Trump administration's fiscal policy plans. Fed Chair Janet Yellen's cautious guidance last week hainvestors pricing in almost no chance of another rate hike at the next policy meeting in May.
Holdings of SPDR Gold Trust GLD, the world's largest gold-backed exchange-traded fund, fell 0.46 percent to 830.25 tonnes on Monday from 834.10 tonnes on Friday. Holdings fell for a third straight session on Monday. "A lot of people have bought gold at pretty unattractive levels and are discarding after seeing interest rates going up. But I would expect those positions to comeback strongly once gold breaks past the 200-day moving average around $1,262,"OANDA's Halley said. Spot silver XAG dropped 0.7 percent to $17.30. Platinum XPT fell 0.7 percent to $961.90, while palladiumXPD was down 0.2 percent at $778.05.