It's all about the dollar for gold and silver, with the dollar managing a minor early bounce and precious metals coming under moderate pressure as a result. Apparently some traders are banking profits and moving to the sidelines ahead of this afternoon's Fed meeting perhaps because they fear the markets might have overstated the prospect of definitively dovish views from the Fed.
In other words with the dollar down significantly over the prior three weeks and gold prices up modestly over the prior three weeks, some position leveling/profit-taking is to be expected. In fact it is likely that the Fed will attempt to be "balanced" with a desire to support psychology without fostering fears of noted slowing.
Overnight gold derivative holdings declined while silver derivative holdings increased, which mirrors fundamental news flow overnight between the two markets.
Apparently Indian silver demand is set to reach a four year high because of government support for its large agrarian sector and that provides silver with a badly needed demand source. The private forecast pegged silver purchases to increase by 6,590 tons this year which in turn would be a fresh five year high! Apparently silver demand from farmers from government handouts will expand more than gold demand because of silver's cheaper pricing.
It should be noted that June gold has seemingly paused at the 50 day moving average over the prior three trading sessions and has waffled around both sides of that moving average for the past five trading sessions and that could make the $1,303.95 level a critical resistance point through the Fed window today.
In our opinion, the gold contract has seen gains of roughly $10 per ounce off the expectation for a "mostly" dovish stance from the Fed a definitively supportive result is needed to avoid some measure of temporary back and fill following the Fed today. However, given that US economic data (and in particular the last nonfarm payroll reading) US data has been very disappointing, and therefore it is likely that the end result of this week's Fed meeting will ultimately leave both gold and silver prices in upward trajectories.
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