Gold prices edge lower as investors remain hopeful for a trade resolution and a Fed rate cut

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From Reuters: Gold prices fell on Wednesday as fresh optimism that the U.S.-China trade dispute could soon end lifted equity markets, pressuring bullion ahead of a U.S. Federal Reserve policy decision later in the day.

Spot gold dipped 0.2% to $1,342.86 per ounce.

U.S. gold futures slipped 0.3% to $1,346.40 per ounce.

“Donald Trump’s tweet that he will meet (Chinese President) Xi Jinping has created speculation in the market that there might be some solution on the trade war,” said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.

“That has supported global markets and equities have risen.”

U.S. President Trump said on Tuesday he had spoken to Chinese President Xi and that the two leaders’ teams would restart trade talks after a long lull in order to prepare for a meeting at the G20 summit this month.

World stocks held near two-week highs on Wednesday as investors bet on a worldwide wave of central bank stimulus, with expectations building that the United States and the euro zone may deliver interest rate cuts as early as July.

All eyes are now on the Fed, which is scheduled to release a statement at 1800 GMT, followed by a news conference by Chairman Jerome Powell.

“Tonight though there won’t be a rate cut (by the Fed), there will be groundwork for future rate cuts. Markets are focusing on that too,” Trivedi said, adding gold was seeing some profit-booking ahead of the event.

The Fed is widely expected to stand pat on monetary policy this time, but open the door for an interest rate cut at its next meeting in July.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion, which had soared to a more than 14-month high of $1,358.04 on Friday.

“A major driver of the gold price rally since 4Q18 has been the Fed’s pivot from expecting rate hikes to expecting cuts… We expect market participants to be disappointed by the Fed’s press conference on Wednesday. This would pressure gold prices,” Societe Generale said in a note.

Denting the metal’s appeal, the dollar index held near a more than two-week high.

Silver dipped 0.2% to $14.97 per ounce, while platinum inched 0.5% higher to $803.53.

Palladium gained 0.9% to $1,493.90 per ounce, having hit its highest since March 27 at $1,496.51 earlier in the session.

The SPDR Gold Shares (GLD) was trading at $126.89 per share on Wednesday morning, down $0.23 (-0.18%). Year-to-date, GLD has gained 2.62%, versus a 9.99% rise in the benchmark S&P 500 index during the same period.

GLD currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #1 of 34 ETFs in the Precious Metals ETFs category.

This article is brought to you courtesy of CNBC.