Marginal gains for precious metals

Prices stay upbeat following Fed's comments

Bullion prices ended marginally higher at Comex on Wednesday, 18 June 2014. Gold prices gained slightly on Wednesday after the Federal Reserve said it expects to hike short-term interest rates a little faster than previously forecast.

Gold for August delivery ended up 70 cents, or 0.1%, at $1,272.70 an ounce ahead of the Fed statement.

On Wednesday, July silver gained 5 cents to settle at $19.78 an ounce.

The Fed reiterated its commitment to the current level of interest rates, saying rates are likely to remain low for a considerable time after quantitative easing ends. Furthermore, the FOMC released its economic projections, but those were not too different from the prior forecast either. According to the projections, the Fed expects the jobless rate to be between 6.0% and 6.1% at the end of the year after calling for a rate between 6.1% and 6.3% in its last set of projections.

During the press conference, Fed Chair Yellen justified the taper by saying the economy is on track to meet its objectives and that the GDP contraction observed in the first quarter was an aberration. Ms. Yellen also noted that inflation remains below the 2.0% objective.

The civil war in Iraq remains a major market factor at mid-week and is prompting some keener risk aversion among many traders and investors. Reports Wednesday said violence in Iraq is still flaring. Crude oil prices are at multi-month highs on worries about Iraqi crude oil exports being reduced, and on concerns the violence in Iraq could spread to other Arab nations.

The Russia-Ukraine tensions are still running high this week as Russia has recently cut the natural gas supply to Ukraine and said it will supply natural gas to Ukraine only if paid for in advance.

The World Gold Council said it will meet in July to discuss revamping the London gold fix, which has been closely watched for over a century.

Economic data at Wall Street was limited to the weekly MBA Mortgage Index and Current Account data for Q1. The MBA Mortgage index fell 9.2% to follow last week's 10.3% increase. The current account deficit for the first quarter totaled $111.20 billion while the consensus expected the deficit to hit $97.80 billion. The fourth quarter deficit was revised to $87.30 billion from $81.10 billion.

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