The prices of gold rose anew on Wednesday as the global equity markets pared some recent gains. Investors are waiting for the Federal Reserve to publish their take on the state of the American economy and potential economic stimulus. Most U.S. stocks fell today and pulled down Asian equities.
Spot gold is currently trading at $1,719.19 an ounce as of 0958 GMT.
Investors adopted a cautious stance while waiting for the Federal Reserve’s monetary policy statement due today at 1800 GMT. This is will be the Fed’s first economic projections since the COVID-19 pandemic triggered a recession in February. Analysts expect the Feds to signal a collapse in economic output for the 2020 and a close to zero interest rates for the next few years. The Feds has already lowered interest to almost zero to cushion the economy against the damage caused by COVID-19. The release of the policy statement will be followed by a press conference from Fed Chair Jerome Powell.
DailyFx currency strategist Ilya Spivak commented that the yellow metal is supported by a risk-off market dynamic over the past 24 hours. Phillip Futures analysts added in a note that gold traders will likely watch out for clues if the projected V-shaped recovery from the coronavirus crisis is true. They said that if the Fed paints a negative picture of the stock market, then it would benefit the yellow metal. Another factor supporting the precious metal is the decline in U.S. Treasury yields.
Meanwhile, the gross domestic product (GDP) in the eurozone contracted because of a decline in investment and household spending. According to Eurostat, the GDP of 19 euro countries contracted by 3.6% on a quarter-on-quarter basis. The statistics office said household consumption was responsible for 2.5 percentage point decline in GDP and investment for 1 point.
In a related development, the holdings of the largest gold-backed exchange-traded fund in the world SPDR Gold Trust fell by 0.1% to 1,124.60 tons yesterday.