Gold price rallies – and it could move higher – The Week UK

Gold recorded its biggest one-day rise in around a month on Wednesday, as new inflation data prompted a big bet on the Federal Reserve holding interest rates and held the US dollar in check.

If the decision goes as most investors – and now even a slim majority of economists in most surveys – expect and borrowing costs are not hiked this month, these trends should continue. It will then be a case of how long the rally can last and how high prices can go.

The precious metal rose to $1,119 on the Comex division of the New York Stock exchange, a 1.5 per cent rise that Market Watch notes marks the most significant advance in close to a month to the highest settlement this week.

But gold is still trading below the $1,120 level at which it spent most of last week, and well below a recent high close to $1,170 in August.

“The prospect of a Fed rate hike is still very low, so things are reacting the way you’d expect them to react if there’s no hike,” Dave Meger, director of metals trading at High Ridge Futures in Chicago, told the Wall Street Journal.

He pointed to data published yesterday showing a surprise fall in inflation, which adds to the case against a rise, saying: “We know that inflation is one of the main focal points for the Fed.”

Assuming the Fed does hold, Matt Weller, senior market analyst at, told Market Watch gold prices should continue higher in the coming days – but he described the likely increase as “short-term”.

This echoes the sentiment of Linn & Associates broker Ira Epstein, who told the Journal yesterday that a rate rise is still likely either in October or December, which will act as a drag on any rally.

“If the Fed leaves rates unchanged, the upside for gold prices would be limited,” explains India’s Economic Times, “as the move would create more uncertainty over the timing of an eventual rate hike.”

Gold price: heading for six-year low, or support hardening?

16 September

Gold dipped again on Wednesday, marking its 12th decline in the past 15 trading days, as the US dollar continued to advance and equities optimists came to the fore amid apparent ‘Fed fatigue’ ahead of a crucial rates decision this week.

The metal slipped below $1,102 an ounce on the Comex division of the New York Stock Exchange and continues to drift lower and towards support levels that have been holding prices steady in recent weeks. 

This coincided with a two per cent rise in the dollar index, which tracks the greenback against other currencies, the Financial Times reports.

Traders and analysts are confounded by current trends in some areas, the paper adds, as “equities suddenly burst into life at the same time as bond prices fell sharply”, and the dollar rose despite US Treasury bond yields, which it typically tracks, falling. 

“One explanation… is Fed fatigue”: investors have had enough of “the endless debate about a 25 basis point move in rates” that will not change the fact that a rise is inevitable soon, but that a return to normal rates will happen very slowly.

Treasury yields hit a four-year high this week and Tuesday’s fall is considered a technical facet of thinner market trading and a jump in rival German bunds. 

Equities are responding to economic strong fundamentals. Gold is negatively correlated to both – and will in any case most likely fall relative to income-paying assets when interest rates do rise.

All of this means gold will fall further, Ira Epstein, a broker with Linn & Associates in Chicago, told the Wall Street Journal. He said: “Be it September, October or December, the gold market is realizing that the Fed rate increase is coming and that will mean a higher dollar. 

“I think gold is starting to say that the next move is going to challenge the current lows at $1,070, and we might go to $1,050 and then $1,000.” Gold prices haven’t been below $1,000 since October 2009

But James Stanley writes in DailyFX that continued support around $1,100 could be indicative of a “lower high” for the metal that will protect it in the coming weeks, especially if the Fed holds. 

Coupled with uncertainty in China that should add to the allure of gold, a traditional safe haven, this could point to at least a modest recovery, some say.

Gold price rally on Fed hold ‘would be short lived’

15 September

Gold prices are continuing to drift lower – but within a very narrow range – as traders wait on the sidelines ahead of a keenly-watched Federal Reserve rates meeting this week.

The precious metal dipped to below $1,108 in Asia overnight, the Wall Street Journal reports, marginally lower than the finish in the previous session but still lingering around the $1,110 level at which it has found limited support in recent days.

The precious metal is unlikely to “make any significant gains until the meeting, when the possible timing of an increase in US interest rates may become clearer”.

Many economists are still predicting rates will be increased for the first time in nine years at the meeting, at odds with a clear majority of investors betting on fund futures. 

Non-yielding gold would suffer from the combined effect of losing its appeal relative to income-paying assets and from a likely rise in the dollar, against which it is often used as a hedge.

This would imply that the metal may rise, along with other commodities, should the Fed heed the advice of the International Monetary Fund among others and hold fire. 

David Govett at brokers Marex Spectron told Bullion Vault his “personal opinion… is that the Fed will not raise rates and [so] Thursday night should see a rally in precious prices”.

But with a rise in US rates looming even it does not happen this month – most investors still expect a hike before the end of this year – how prolonged will a rally be for gold, which has fallen significantly throughout 2015 in anticipation of fiscal tightening? 

“If the Fed doesn’t raise this month, they will emphasise that the raise is not far off”, Govett adds, so “the rally will probably be short lived”.

Gold price: all eyes on Fed as ‘test’ of lows predicted

14 September

Gold could “re-test” is current low price support level and head towards five-year lows reached earlier this summer, as attention turns to a crucial meeting of US central bank rate setters this week.

The precious metal dipped below the psychologically important threshold of $1,100 an ounce on the New York Comex exchange on Friday, The Bullion Desk says, before recovering to around $1,107. It edged up again in Asia overnight to settle at a $1,109, with traders predicting the near-term trend will depend heavily on the Federal Reserve’s rates decision.

A move to increase rates will put fresh downward pressure on commodities and especially gold, which does not pay an income and so would look increasingly unattractive compared to other assets. The gold price also moves in the opposite direction from that of  the US dollar, which should rise when rates are increased.

If, however, rates are held again, what will happen to gold will be determined by how the Fed reached its decision and whether it signals that the postponement is short-term. A more “dovish” stance, pointing to a later rise, could trigger a rally, though this will itself “depend how equity and currency markets also react to the Fed’s decisions”, HSBC’s James Steel told Reuters.

Overall, traders remain bearish on gold, which as an inflation-hedge is struggling at a time of price stagnation. Hedge funds and other institutional investors have cut their ‘long’ positions to a three-week low and increased their ‘short’ positions, effectively banking on the price falling.

Reuters technical analyst Wang Tao said before the Fed meeting the price would “re-test” the $1,099 level, at which it has found support recently, and there is “a good chance of breaking below this level”. The next support to be found would come in at  $1,089.

Gold closed at a five-and-a-half year low of $1,084 in July.

Gold price continues to ‘seek out a bottom’

11 September

Gold recovered modestly on Thursday after hitting its lowest level for a month on renewed rate rise speculation, but analysts expect the downward trend to continue as the price “seeks out a bottom”.

More immediately, Daily FX‘s currency strategist James Stanley says “near-term support has come in just above the $1,100 level”. 

Gold had tested this threshold, which is close to multi-year lows reached in August, on Wednesday when it closed at $1,105 an ounce. Yesterday the gold price rose slightly amid wider equities falls, settling at $1,110 an ounce on the New York Comex exchange.

But analysts are not convinced that the market has reached its nadir. Even including the Thursday rise, gold prices had recorded ten falls in 13 sessions, with five consecutive days of decline leading up to the modest recovery. Chintan Karnani, chief market analyst at Insignia Consultants in New Delhi, told Marketwatch that gold is “not out of the woods yet” as the market remains fixated on the questions of when interest rates will finally rise.

BNP Paribas cut its 2015 outlook for gold by $15 to $1,145 an ounce, at the same time It also reaffirmed its view that it will “see a downturn through 2017”. This follows a prediction from ABN Amro that gold could fall as low as $1,000 this year and further next.

Mark O’Byrne, executive director at GoldCore, based in Dublin, said there was current a split in sentiment between physical buyers of gold bullion and the futures market, which is used as a hedge for inflation and a proxy currency and is struggling to gain traction. Bullion buyers, however, are banking on price rises “due to a combination of geopolitical, macroeconomic and monetary risk”.

Gold price slumps towards five-year lows – and stil ‘expensive’

10 September

Having drifted for about a week, gold futures made a more definitive move on Wednesday – and the direction was down.

A strong US Labour Department report, which according to revealed the number of job openings in America is at a 14-year high, prompted a surge in the dollar as hitherto negative bets on whether the Federal Reserve will increase rates next week became more even. Gold moves inverse to the greenback – and with no inflation against which to hedge and at a time of weak physical demand, there is not much in the way of good news.

As a result, gold slumped to $1,105 an ounce, coming “close to crashing through the psychologically important $1,100 level” during the session. It is approaching the five-and-a-half-year low reached in August of $1,084, with a move in interest rates only likely to push it lower. Business Standard reports that expectations a rise is imminent have already dragged gold down five per cent this year, extending a long-term decline from a peak of $1,900 in 2011.

Also weakening sentiment was a report from investment bank ABN Amro, which revealed that despite its recent poor performance and multiyear nadir, gold is still expensive relative to more cyclical peer commodities such as copper, platinum and silver, suggesting it has significantly further to fall this year and next. says the bank’s “house view is a gold price of $1,000 an ounce by the end of the year, weakening to $800 an ounce at the end of 2016.”

Those hoping for a recovery will be looking to the ongoing concern over China to help prop up prices, after the latest data published last night pointed to weakening producer prices and the threat of deflation. If fears of slower Chinese growth prompt a devaluation of the renminbi and a ‘currency war’, gold may just recover some of its appeal as a safe haven.

Gold price bucks losing streak but remains in ‘no man’s land’

9 September

Gold bucked a five-session losing streak and settled higher at the close of trading in both London on Tuesday and overnight in Asia, but weak trading and marginal gains that failed to track the wider commodities bounce exposed its continuing weakness ahead of a decision on US interest rates.

BullionVault says that the precious metal edged slightly higher in London and even touched a three-session high during the session of $1,126 an ounce, but that it lagged a 2.5 per cent bounce in silver and even stronger 4.5 per cent surge in copper. Commodities rose on the back of a wider markets rally and news that mining giant Glencore is easing back production.

A note from the Chinese-owned ICBC Standard Bank’s commodity unit said gold was currently “immune from the mini ‘risk-on’ bounce that has lifted most other commodities”.

Overnight notes that gold eked out a further 0.1 per cent rise as Chinese authorities moved to quell investor fears over a “hard landing” for the country’s economy, which boosted sentiment on commodities further.

Gold’s weakness reflects the continued focus on a Federal Reserve meeting next week at which analysts believe there is a “50-50 chance” rate setters will raise the benchmark rate “for the first time since 2006”. This may happen despite warnings to the contrary from most recently the World Bank. Non-yielding gold “struggles to compete with high-yield bearing assets in periods of rising rates”.

“Gold is currently in no man’s land,” according to a note from Swiss investment and bullion bank UBS, cited by BullionVault. UBS adds “investors are understandably hesitant to put on sizeable positions ahead of the… meeting next week”.

Gold price: is its long-term decline resuming?

08 September

Gold is drifting. Prices have been dropping over the past week, but the decline is gradual and trading volumes are extremely low as investors ignore wider trends and sit on the sidelines ahead of a long-awaited interest rate decision in less than two weeks’ time.

With US markets on holiday, gold eased down slightly in London on Monday and in Asia overnight, settling at $1,118 an ounce. Reuters notes prices did dip to $1,116 during the European session, marking the lowest level since 19 August, but in truth settlements have been in a narrow range of around $5 for the past week.

“Gold continues to test support around $1,115-$1,117,” said MKS Group trader Sam Laughlin. “Short term we see $1,115-$1,130 as the likely range.”

One bullion trader in Hong Kong said there was now unlikely be “a big move” until a Federal Reserve rate setting meeting in two weeks, when the US central bank could vote to increase rates for the first time in nine years amid broadly positive signs on the jobs market. This is dominating all other trends, the trader noted, adding that gold “is not even reacting much to what we are seeing in the equities market”.

Barclays said in a note quoted by The Bullion Desk that even the September decision, if it is a hold on rates as is now widely expected, would offer only “limited support” given that a slightly later rise is already “priced in” to the market. Even the most dovish analysis suggests that rates will increase either before the end of this year or very early next year, and this will hit non-yielding gold.

Currency strategist Ilya Spivak writes in Daily FX that gold could even be about to resume a “long-term down trend”, as it continues to retreat from a high near $1,200. “From here, the next level of near-term support comes in at $1,108”, with a settlement below this level opening the door for a test of $1,089, close to this summer’s multi-year lows.

Gold price edges lower as rates rise looms large

07 September

The gold price is still rooted in a very narrow range and trading volumes are limited ahead of the Monday markets holiday in the US, but the metal is still edging lower as a looming interest rates rise comes into sharper focus.

After a “thin” trading session in Asia overnight, gold dipped as low as $1,118 an ounce, reports. It settled at $1,121, marginally lower than its close last week as it continues to retreat gradually from a high of $1,168 reached in late August.

Since then, the Daily Telegraph says, despite wild stock market gyrations, speculation of a sharp slowdown in Chinese growth and increasing concern about the global economic recovery, gold has bucked its apparent “safe haven” status and actually “slumped” 3.5 per cent.

The apparent cause is that the “US Federal Reserve is still on course to increase the key central bank borrowing rate before the end of the year”, the paper says. A US jobs report on Friday showed that unemployment in the world’s largest economy is at an eight-year low, adding weight to the view that rates will rise soon. This “will dull the precious metal’s appeal, as it offers no interest, or income, to investors”.

Earlier last week “the European Central Bank lowered its expectations for inflation and growth during the next three years”, further hitting a metal that is also seen as a “store of value which protects against the ravages of high inflation”.

All of which suggests gold may yet fall further. This view is supported by weak recent demand for the metal, especially in China, the second largest market for gold in the world. The Financial Times says demand from the world’s second largest economy may yet fall further, pointing to “a sense of panic among retail investors” that “does not bode well”.