Gold prices moved mostly higher in electronic trading Wednesday, after ending the regular session with a loss, as the Federal Reserve stood pat on interest rates, as expected, and offered few clues on the central bank’s next move.
Prices for the metal had declined for the session as the dollar strengthened after healthy U.S. economic reports, including a better-than-expected snapshot of private-sector hiring, which some saw as lifting the odds of a series of interest-rate hikes from the Fed.
April gold GCJ7, +0.82% climbed above $1,210 an ounce in electronic trading shortly after the Fed announcement. Prices for the contract had settled at $1,208.30 an ounce before the Fed news, down $3.10, or 0.3%, for the session. Tracking the most-active contracts, prices rose 5.2% in January, according to FactSet data, which was the strongest monthly performance since June.
After the Comex settlement, the Fed kept interest rates unchanged, with the federal-funds rate in a range of 0.5% to 0.75%. In December, the Fed signaled it wants to raise interest rates three times this year. The market expects two rate hikes, with the first coming in June.
“The Fed announcement and policy statement was about as anticlimactic as I can remember,” Brien Lundin, editor of Gold Newsletter, told MarketWatch. “For once, the FOMC managed to stay perfectly in the middle of the road, offering no encouragement to either the hawks or doves.”
“They are obviously still in a wait-and-see mode, and don’t want to make any moves until they have some idea of the Trump administration’s fiscal policies and their potential effects on the economy,” he said. “Still, by simply removing the risk of some sort of a surprise, the passage of the meeting has allowed gold and stocks to rebound a bit from their premeeting lows.”
Early Wednesday, gold had added to earlier losses after a reading of manufacturing contributed to optimism about the U.S. economy—usually a negative for gold. The Institute for Supply Management said its manufacturing index climbed to 56 last month from a revised 54.5 in December. That is the highest level since the end of 2014.
The ICE U.S. Dollar Index DXY, -0.30% a gauge of the buck against a basket of six currencies, climbed Wednesday. Moves in the U.S. dollar can influence the appeal of dollar-denominated gold to holders of other currencies. And, gold tends to move inversely to Treasury yields TMUBMUSD10Y, -0.67% since gold offers no yield.
Private-sector hiring picked up in January, as employers added 246,000 jobs, well above expectations, ADP reported Wednesday. The report may set the tone for a stronger-than-expected reading on broader payrolls, due for release Friday morning.
“The Fed is not the major part of the equation when it comes to the dollar, which impacts the price of gold but yes, they still have an impact when [a] strong economic number comes out,” said Naeem Aslam, chief market analyst with ThinkMarkets. The Fed is “still data dependent when it comes to hiking the interest rate and the data released today was simply a blow out number.”
Looking ahead, investors will closely follow Friday’s jobs report as the final important inflation statistic this week, with a focus on wage growth.
Elsewhere on Comex, March silver SIH7, +1.17% fell 9.3 cents, or 0.5%, to settle at $17.45 an ounce. March copper fell by 1.6 cents, or 0.6%, to $2.712 a pound. April platinum PLJ7, +0.84% tacked on $3.30, or 0.3%, to $999.80, while March palladium PAH7, +0.79% edged up by $8.60, or 1.1%, to $762.90 an ounce.
Exchange-traded funds barely budged. The SPDR Gold Trust GLD, -0.30% fell 0.2%, the iShares Silver Trust SLV, -0.12% added 0.1%, and the VanEck Vectors Gold Miners ETF GDX, -0.33% fell by less than 0.1%.