Gold awaits the next steps from Fed
On Tuesday, gold prices were reasonably stable, hovering slightly below recent highs. Investors anticipated more economic clues from inflation data and the Federal Reserve’s March meeting minutes, which are expected later this week.
Gold prices had fallen from a more than month-high after US nonfarm payrolls (NFP) data revealed sustained strength in the labor sector in March. However, they were still supported by safe haven demand as morale remained low amid worries of declining economic growth and uncertainties over monetary policy.
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Consumer price index (CPI) data, which is coming on Wednesday, will help the markets determine whether the Fed has more motivation to keep rising interest rates. Higher rates would be bad news for the gold market. The reading on Wednesday is anticipated to stay rather high.
The present market pricing suggests a higher likelihood of an additional 25 basis points (bps) rate hike at the May FOMC monetary policy meeting. The NFP data, commonly referred to as the US monthly employment figures, which was issued last Friday, helped to increase the bets.
Newmont wants to dominate Newcrest’s takeover
In other gold-related news, Newmont is aiming to solidify its position as the world’s top gold producer. The gold giant increased its all-stock acquisition offer for smaller Australian competitor Newcrest Mining.
Shareholders of Newcrest would get 0.4 Newmont shares for every share they own under the modified conditions. This is an increase from the 0.38 offer that the board of Newcrest unanimously rejected in February.
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According to market value and ounce output, Newmont is the world’s biggest gold producer. If the purchase is through, Newmont’s output would be almost twice as high as its closest competitor, Barrick Gold.
Early in the day on the stock exchange, shares of Newmont fell 3.1% to 49.48. A lot depends on the Colorado-based company’s “best and final offer” of A$29.4 billion ($19.5 billion) for Newcrest.
Gold is still attractive to buyers
Tuesday sees new purchasing in the gold market as it breaks a two-day losing run and returns to the $1,982-$1,981 range. This was a three-day low reached the previous day.
Through the first half of the European day, the XAU/USD maintains its intraday gains and is presently trading just over the psychological level of $2,000, close to the top of the daily trading range.
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The bulls are keeping a strong base around the $2,000 mark which currently acts as support. They will aim higher, possibly towards $2,030. The bears are waiting for the opportunity of unfavorable data to push the gold back below $2,000.
Gold spot 1D chart, source: tradingview.com, author’s analysis