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Apr 30

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Gold futures extend decline ahead of Fed’s rate decision

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Gold futures extend decline ahead of Fed decision

By Polya Lesova, MarketWatch

Last Update: 11:16 AM ET Apr 30, 2008

NEW YORK (MarketWatch) — Gold futures extended their decline early Wednesday, as
traders awaited the Federal Reserve’s decision on U.S. interest rates.

Gold for June delivery fell $6.20 to $870.60 an ounce on the New York Mercantile
Exchange.

“Short-term direction will now depend largely on what the Fed says and does,”
said James Moore, analyst at TheBullionDesk.com.

But in light of recently improving dollar sentiment, “we expect gold to remain
under pressure, potentially testing down toward the psychologically important
$850-an-ounce level,” Moore wrote in a research note.

On Tuesday, gold dropped $18.70 an ounce.

At 2:15 p.m. Eastern time, the Fed is expected to announce an interest-rate cut
of a quarter of a percentage point, to 2%, though investors are most likely to be
looking for any indication that monetary policy will then be put on pause. See
full story.
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On the currency markets, the dollar traded mixed against major counterparts. The
dollar index, which tracks the performance of the greenback, edged down 0.05% to
72.83. See Currencies.
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In economic news, the ADP employment report showed that companies in the U.S.
private sector added 10,000 jobs in April. The report comes two days before the
Labor Department reports pivotal data on the state of nonfarm payrolls for April.
Read more.
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Adding in some 25,000 jobs typically created by government, the ADP report
suggests nonfarm payrolls grew by about 35,000 in April, compared to the drop of
80,000 expected by Wall Street economists.

Analysts note that the ADP has overshot the employment report in each of the past
five months, however. Economists had expected the private-sector projection,
based on a sampling of payrolls serviced by ADP, to drop by 55,000 in April.

Separately, the U.S. economy barely kept its head above water in the first three
months of the year, growing at an annual rate of 0.6% as a result of inventory
building, strength in exports and resilient consumer spending. See Economic
Report.
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Growth in real gross domestic product in the first quarter was estimated at 0.6%
for the second straight quarter, ahead of the 0.2% growth rate that had been
expected by economists surveyed by MarketWatch.

Crude-oil futures dropped after the Energy Department reported that crude
inventories rose 3.8 million barrels to 319.9 million barrels in the week ending
April 25. Analysts surveyed by Platts had expected an increase of 1.6 million
barrels.