Chicago 27/07/2016 - The Federal Reserve decided to leave the Federal Funds rate unchanged on Wednesday, but said "near-term risks to the economic outlook have diminished" - although the change in language had little impact on equity and commodity markets.
Gold for August delivery on the Comex division of the New York Mercantile Exchange had a muted reaction, last trading at $1,326.30, essentially unchanged from before the statement was released.
Comex copper for September settlement fell 3.90 cents or 1.8 percent to $2.2865 per ounce. Trade has ranged from $2.1815 to $2.2345.
"This is a small step in laying the groundwork for an interest rate hike but I wouldn't say it's a full step," CNBC senior economics reporter Steve Liesman.
The policy-board has been contending with a decelerating labour market, which has averaged 147,000 jobs gained per month in the second quarter compared with 196,000 in the first three months of the year.
After a dismal figure of 11,000 added jobs in May, payroll growth bounced-back with a 287,000 bombshell in June. Nevertheless, with the unemployment rate quickly approaching sub-five percent, labour market expansion is likely to decline as the economy approaches full employment.
Another contributing factor for maintaining historically low interest rates was the recent UK referendum vote to exit the Eurozone - deemed 'Brexit' – which rattled markets and sent volatility to multi-year highs.
But economic conditions have stabilised and now chairwoman Janet Yellen and her fellow central bankers will weigh the potential risks of raising rates despite recent information from the International Monetary Fund that the global economy won't grow as fast over the next few years as previously thought.
"This does leave September as a open meeting. They are trying to nudge expectations towards a hike," David Kelly, JP Morgan chief global strategist said.
"They know that the data could get better so they don't want to shock the market if they do move. They're sending a message that our worst fears have not been realised," he added.
Friday's Bank of Japan meeting could have greater impact for markets give the weight of expectation of more aggressive fiscal and monetary stimulus following the recent election victory by Prime Minister Shinzo Abe's Liberal Democratic Party in the recent upper house elections.
The Bank of Japan (BoJ) is considering to implement an expanded $265 billion stimulus package, part of which would target low-income citizens to boost non-existent inflation and weak wage growth.
In technical positioning, upward momentum has ceased and investors are starting to exit exchange-traded-funds (ETF's) tracked by FastMarkets, with 4.3 tonnes of outflows overnight. It now brings the total to 2,077 tonnes, a steady deceleration since hitting a three-year high on July 11.
"We are keeping our bearish short-term view intact because of the deterioration in the technical picture as well as rising US real rates, which could continue should the Fed's monetary statement be more hawkish than expected," Boris Mikanikrezai, metals analyst at FastMarkets, said.
"Still, we remain constructive over the third quarter, seeing the uncertain macro backdrop as conducive to lower US real interest rates, boosting non-speculative positions on Comex as well as ETF holdings," he added.
Core durable goods orders month-over-month in June came in at -0.5 percent, estimates had called for a 0.3 percent uptick. Durable goods orders over the same period fell to -4.0 percent while forecasts estimated a -1.1 percent downturn.
Pending home sales month-over-month in June gained 0.2 percent, missing economic consensus of 1.9 percent. Crude oil inventories between July 15-22 rose 1.7 million barrels – projections expected a -2.1 million barrel reduction.
In American equities, the Dow Jones industrial average and S&P were down 0.1 percent and 0.3 percent respectively, while the dollar was unchanged at $1.0982 against the euro.
As for other precious metals, Comex silver for September delivery rose 25.2 cents or 1.3 percent to $19.935 per ounce. Trade has ranged from $19.575 to $20.175.
Platinum for October settlement jumped $25.80 or 2.4 percent to $1,124.80 per ounce while the most active palladium contract was last trading at $703.30 per ounce, up $10.50 or 1.5 percent.
(Editing by Tom Jennemann)