Following each of the four Federal Open Market Committee meetings earlier this year, the body of policy makers decided to slash monthly asset purchases by $10 billion per month. As the FOMC prepares to meet for two days beginning on Tuesday, confidence is high that the body will continue tapering stimulus measures, considering it has said it would like to close the economy-stimulating program by the end of this year.
Geopolitical events have been driving the yellowish metal's price higher as of late, as bullion emerges and is underscored as a haven asset. Ukraine's efforts to tamp down pro-Russian separatists in Crimea and Iraq fighting with Sunni Islamic militants are two examples that spurred gold's advance of nearly 2 percent last week.
The FOMC convening its "June meeting will be in focus this week while a U.S. dollar rebound could weigh on bullion prices, provided Iraqi headlines subside," states a Tuesday email authored by analyst Andrey Kryuchenkov with VTB Capital in London, according to Bloomberg. "Bullion's long-term outlook remains unaltered, despite the safe-haven trading last week."
As FOMC policy makers prepare to convene later on Tuesday, interest and concerns are spreading about the decision of the body, according to Reuters. But that decision won't be out until late in the Wednesday trade session.
In addition to keeping an eye on whether the body slashes stimulus measures, market participants also are keeping an eye on whether the FOMC indicates what lies ahead as far as interest rates is concerned.
For that reason, economic data about manufacturing, business sentiment and orders plays a key role in the decision-making process.
Climbing demand benefits gold futures
Over time, the yellowish metal finds traction when worldwide conflict manifests as markets become edgy, investors concern themselves with questionable sentiment, and demand climbs for the constant presence of bullion.
For that reason, the strife in Iraq is helping drive gold futures higher. Since early last week, Sunni Islamic militants have captured large swaths of land in the northern region of the Middle Eastern nation. While seizing cities and other municipalities, the militants have subdued large amounts of Iraq's military. That is of concern to the U.S., which devoted sizable resources to war efforts in Iraq.
The U.S. has dispatched military to the region, both soldiers into Iraq and firepower via material to the area, while pondering next steps. One option is to merge efforts with Iran.
"In the short run, worries of conflict might support gold prices, but with limited impact," precious metals analyst Chen Min with Jinrui Futures in Shenzhen told Reuters on Tuesday.
Housing market data to influence gold futures
MarketWatch reports the U.S. is preparing to release economic data about the housing market, which is likely to loom large as the Fed meets.
In advance of that economic data, the yellowish metal lost value early during the Tuesday trade session, as it relinquished some of its recent gains.
Those recent gains were connected with strong data regarding factory production and construction. Builder sentiment data released on Monday marked its strongest advance in nearly 12 months. The factory production data was stronger than projected.
For that reason, one analyst said gold bugs have reason to hold a bright outlook looking forward.
"Gold market bears still have the slight overall near-term technical advantage. However, the bulls are making a move," Jim Wyckoff with Kitco News told MarketWatch on Tuesday. "The gold bulls' next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300."
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