Gold miners have shed the exuberant skin they formed as failing banks sent investors rushing for safe havens early this week.
That has been replaced by a nervous atmosphere, with nailbiting all round as gold producers wait to see where the US Fed heads with interest rates tonight.
Prices fell over 2% overnight, with the London Bullion Marketing Association reporting PM prices fell from near 12-month highs to US$1952.50/oz overnight.
According to ANZ’s Jack Chambers, around 80% of the market expects a 25bps rise. Despite the lift, the lower severity on previous 50 and 75bps increases would be viewed positively in the precious metals space.
“The risk-on tone across markets weighed on gold. Investor demand waned as US equities rallied and yield on US Treasuries rose,” he said.
“All eyes now shift to the Fed’s two-day meeting that culminates on Wednesday (Thursday morning Sydney time).
“The market now sees a roughly 80% chance of a 25bp hike. This would ultimately support the precious metals sector.”
On the other hand copper is looking a little brighter, with the red metal lifting marginally to around US$8700/t, a fourth straight gain.
“Copper rose for the fourth session as concerns of a full-blown banking crisis eased,” Chambers said.
“Swift action by regulators have (soothed) concerns that the banking crisis would impact economic growth.
“The recent selloff has also cleaned out excessive length in investor positioning, with some evidence of short covering amid the improved risk appetite.
“Signs of stronger demand in China also boosted sentiment. Inventories at Shanghai Exchange warehouses fell 15% last week. Stockpiles immediately available for delivery at LME warehouses also fell this week.”
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