Gold: 356.7
Silver: 4.54
USD: 94.25
Gold eases in Europe, market watches U.S. rates
Mon June 23, 2003 06:51 AM ET
LONDON, June 23 (Reuters) - Gold eased in Europe on Monday morning as a falling euro made the metal less affordable, but trade was thin with most players cautious ahead of this week's U.S. Federal Reserve rate meeting.
Bullion had trod a fairly steady path in Asia, despite the euro dropping to a one-month low against the dollar, before continued losses started to bite. Traders said gold could test support at $353.00 an ounce ahead the Fed's rate gathering.
The Federal Open Market Committee sits down on Tuesday and Wednesday when it will put an end to the guessing, over the depth of expected rate cuts, that has seen wild gyrations in the dollar and, as a result, in gold.
"Generally, expectations had been for a 50 basis point cut to be the result and for this to be the final cut in this easing cycle. However, the recent run of slightly better-than-expected economic data has seen expectations soften towards a likely 25 basis point cut," Kamal Naqvi, metals analyst with Macquarie Investment Bank, said in his weekly report.
Traders said expectations were split between a rate cut of 25 basis points or a more aggressive half percentage point -- either of which could boost gold by pushing the real yield of U.S. deposits over the inflation rate further into negative territory.
"A 50 basis point cut could been seen as a much-needed shot in the arm for the U.S. economy, therefore positive for U.S. company earnings and equity markets will benefit," Naqvi said.
"On the other hand, it could be argued that equity markets have already priced in a cut, and a large cut would raise fears and be seen as a desperate attempt to stave of deflation due to knowledge that economic growth was slowing significantly," he added.
Spot gold was quoted at $356.00/6.75 an ounce at 1048 GMT, after touching a low of $355.00 earlier and compared with $356.80/357.30 in New York late on Friday.
"We've run out of steam on the upside above $360.00, there's nothing really there to try and push it further. A lot of people are holding off doing anything ahead of the Fed meeting," said Rory Mcveigh, dealer at Mitsubishi in London.
"We could see a test on the downside to around $353.00 in the next two days. There's still a bit of influence coming from the dollar -- the euro and the yen, have taken a bit of a beating and that's promoting the downside," he said.
EURO AT ONE-MONTH LOW
The euro was trading at a one-month low against the dollar at $1.1538/43. A surging euro sent bullion to a 15-week high of $374.40 in late May, while the dollar's subsequent comeback pushed the metal as low as $351 on June 10.
As spot bullion is priced in dollars, the fluctuating value of the greenback affects the gold buying power of holders of other currencies, with dollar gains dulling the metal's investor appeal.
Analysts said gold could also come under pressure from large speculative holdings on the U.S. futures market, which sparked pockets of sudden selling recently. Although the number of positions held has fallen, speculative exposure remains high.
Spot silver was fetching $4.52/54 unchanged from levels quoted in New York late on Friday.
Spot platinum rose to $666.00/671.00 an ounce from New York's last $665/670.
Spot palladium was at $176.00/181.00 an ounce, up from $174.50/180.50.
reuters.com |
