Gold Stuck Under 1600 Ahead of the FOMC Decision

                     Markets are very volatile on Monday morning reacting to news of a bailout agreement with Cyprus. The new agreement calls for a tax on all bank deposits which is upsetting traders and depositors around the globe. Russian citizens are estimated to have 2 billion dollars on deposit in Cyprus, as well as global citizens that live in Cyprus, even the UK military that keeps a force of 3000 soldiers deployed on the island. The wide range of effects has yet to be seen but this morning the euro and Asian equities are taking a major tumble.

The surprise as traders move to safety is that gold is seeing little change. Gold is trading at 1596.00 adding $3.40 while silver tumbled to 28.723. Gold closed higher on Friday, marking its second straight weekly gain in the international market, as the euro firmed, US and European shares fell and the US consumer price report supported the view that the Federal Reserve has leeway to keep up its monetary easing. Gold remains in a difficult situation with the FOMC meeting on the 20^th as traders are not sure what to expect from Mr. Bernanke and associates.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,233 tons, as on March 16. Silver holdings of ishares silver trust, the largest ETF backed by the metal, increased to 10,733.6 tons, as on March 16.

The dollar index, traded at 82.277 compared with 82.605 in late North American trading on Thursday. This morning the US dollar index is trading at 83.035. The euro has tumbled by 170 points to trade at 1.2907 in Asian trading and continues to weaken. The euro zone remains vulnerable to shocks because of weak banks and incomplete regulatory safeguards, the International Monetary Fund said on Friday, in a warning to European leaders not to slacken their efforts to build a more resilient financial system.

Last Thursday, a better than expected jobless claims send gold lower. Gold opened at $1582 and dropped to an intraday low at $1577. During late trading, gold recovered subsequently as USD declined. Priced reached the day’s high of $1593, before closing at $1593. On Friday markets were a disappointed as US data missed the mark but gold and silver held their current trading range. Talk about inflation increased on Friday after the February consumer price index data came in higher than expected. The overall figure was up 0.7% in February, the highest since June 2009. The Federal Reserve begins a two-day meeting March 19 as inflation below the central bank’s target may provide scope to maintain monetary stimulus and support gold prices. Positive data with unemployment tumbling may limit monetary stimulus supporting the US dollar and a drop in gold prices.

Courtesy : FxEmpire