Gold Slightly Lower as Market Awaits FOMC

The price of gold is slightly lower in U.S. trading on Wednesday as some mild profit taking and a corrective pullback after recent gains affect the market following the rally the brought prices to a three-week high. Currently, the market awaits the results of the Federal Reserve’s FOMC meeting taking place in Washington.

The spot price of gold lost $5.85 or 0.35 percent to $1,607.15 per troy ounce. U.S. gold futures for April delivery lost $5.10 or 0.32 percent to $1,606.10 per troy ounce.

Recently upbeat U.S. economic data has aroused anticipation the Fed could initiate an exit strategy for its unprecedented quantitative easing program. The minutes of the FOMC meeting released in February of this year signaled some members of the policy-making committee are leaning towards a pullback in easing sometime this year. Market reactions to the possibility of pullback are strong as easing has been a major bolster to precious metals in recent years. If such an announcement were to take place at the press conference, the reaction in precious metals would be strong and immediate but not entirely indicative of the actual market, as evidenced by strong physical bullion sales in recent weeks.

The market also continues to be focused on the controversial European Union and International Monetary Fund bailout package for Cyprus, which was unveiled over the weekend and proposed the taxation of savings accounts in domestic banks. The market concern is focused around the possibility that similar proposals could be floated in other troubled European Union economies, which most likely is still the pervasive worry despite the Cypriot parliament voting down the measure almost unanimously.

Banks in Cyprus remain closed this week amid the financial confusion and an auction of German 10-year bunds on Wednesday produced the lowest yield since last July, underscoring a change in the attitude toward risk currently emanating from the European Union.

Gold futures bulls have gained some fresh upside near-term technical momentum, according to Forbes, which suggests a near-term market bottom is in place. The gold bulls’ next upside near-term price breakout objective is a close above the solid technical resistance at $1,619.70 per troy ounce. There is solid technical support at $1,575.00 per troy ounce.

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