Gold Shows Gains Ahead of Federal Reserve Statement

Gold has rallied on Wednesday as mechanics at a price of $ 1,326.45 cash per ounce in the North American session industries. In the liberation front, the US economic indicators disappointed, as orders for durable goods and durable goods orders both have experienced reductions. In turn, the pending home sales showed a small increase of 0.2%, well below expectations. Later in the day, the Federal Reserve will conclude its meeting and issue a policy statement. On Thursday, US will release unemployment claims.

We could see some volatility in gold prices ahead of policy statements of the Federal Reserve and the Bank of Japan. The Fed is not expected to raise the current benchmark rate of 0.25%, so the markets focus on the policy statement is provided, for clues about a possible rise later in the year. Markets have priced in a 51% chance of a rate hike before year-end, but that could quickly fall if the Fed sends a message pessimistic markets. The previous policy statement Brexit preceded the voting for only a week, so it will be interesting to see what the Fed has to say about the British decision to leave the European Union. US solid numbers in recent weeks has fueled speculation about a possible rise in interest rates, although it is very unlikely that the Fed will make a move at Wednesday's meeting. Although the US economy is in good shape, the fly in the ointment is inflation, which remains mired at low levels, well below the target of 2 percent of the Fed. The Fed dare to raise rates if inflation is not projected to point upwards.

US numbers have been strong in recent weeks, so the soft durable goods reports Wednesday caught markets by surprise. Core Durable Goods Orders stood at -0.5%, well below the forecast of 0.3%. There was no relief orders for durable goods products, which recorded a sharp gain of 4.0%, compared with a forecast of -1.1%. This marked the weakest reading in 2016. There was no more disappointing news on the housing front as pending home sales rose 0.2%, well below the estimate of 1.9%.

The Bank of Japan has been under strong pressure to adopt further easing measures, but does it have any monetary ammunition left? Interest rates are already at zero, and the economy continues to struggle with deflation. Other options available for the bank include the amount or extending flexible quality. The Bank of Japan will issue a policy statement Thursday night, and it is unclear whether the bank will take additional easing measures.

/ USD XAU Basics
On Wednesday (July 27)

8:30 US Core Durable Goods Orders. 0.3% estimate. Real -0.5%
8:30 US Durable Goods Orders. -1.1% Estimate. Real -4.0%
Sales 10:00 United States still homeless. 1.9% estimate. Current 0.2%
10:30 oil inventories US. -2.1M Estimate. Real + 1.7M
Declaration 14:00 US FOMC
14:00 federal funds rate in the United States. Estimation <0.50%
Upcoming key events
Thursday (July 28)

8:30 jobless claims US. 261K estimate
* Key Announcements are highlighted in bold
* All times are EDT release

XAU / USD for Wednesday, July 27, 2016