By Commoditiesmansion.com – On Wednesday, the Gold ended the European session struggling around records high as the market shifted the focus to the Federal Reserve.
Investors were pondering on whether the continued loose monetary policy will keep the downside pressure on the dollar, or whether the feds will turn downbeat on inflation and growth, or the last and slimmest option is turning hawkish!
The final verdict will affect investment decision and the market entirely and accordingly the status for gold whether a hedge against inflation, haven demand, or decline on a strong dollar and interim haven demand amid overpriced gold.
Therefore, we see that the overall outlook for the options against the feds is collectively and singularly bullish for gold, yet the direct impact might provide room for the metal to decline. The end of the QEII without any new confirmations over coming stimulus means will automatically ease some pressure off the dollar and some of the hedge on the metal that rallied on the program on the back of the dollar flooding and the need for diversification.
The metal might continue the correction to the downside for now and into the rest of the week, especially after the comments to be seen later today and with the GDP on queue for Thursday.
After the market absorbs the Feds comments later today, the movement will then be influenced by the growth figures tomorrow and confirmations for continued expansion in the US with subdued inflation, which might ease the demand for haven on the metal further and support profit taking on the metal from the records.
At 12:30 GMT the advance GDP estimate for the first three months of the year is expected to show the recovery loosing some momentum from the previous quarter with 2.0% expansion from 3.1%.
Personal consumption is expected to have halved to 2.0% from the previous quarter 4.0% and Core PCE at 1.4% rising from 0.4% which is a gauge of inflation checked by the Feds and still in a secure area.
The weekly jobless claims are expected to drop to 395,000 from 403,000. While at 14:00 GMT the pending home sales are expected with 1.5% rise slowing from 2.1%.
Heavy volatility is expected for gold on Thursday as investors react on the Feds comments from the US late tonight to Asia tomorrow morning and into the European session. Nonetheless, the odds are still slim for a strong shift in the monetary policy outlook and likely the gold will sustain its gains but the correction for now is not totally ruled out as jitters ease.
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