Gold News

Gold Outlook "Shifts to Upside" as US Fed Hawk Bullard Says "Delay QE End", Equities Slump Again

GOLD  BULLION recovered a $5 drop Thursday afternoon in London after US Federal Reserve member James Bullard said the central bank may delay ending its QE asset purchase scheme as expected this month.
 
A non-voting member of the Fed's monetary policy team until 2016, the St.Louis Fed president repeated his forecast that interest rates should still rise in the first quarter of 2015.
 
World stock markets cut earlier losses but Europe stayed sharply lower for the second day running as Brent crude oil fell below $80 per barrel for the first time since mid-2012.
 
The US Dollar meantime gave back a small rally on the currency markets, while 10-year US Treasury yields added 1 basis point to 2.15% per year.
 
Having slipped to $1237 per ounce, gold prices traded up to $1242 – a "key resistance" level according to several bullion bank analysts.
 
Voting Fed member Charles Plosser, head of the Philadelphia branch, had earlier today echoed comments Bullard made only last week about "significant progress" in boosting inflation and cutting unemployment, using the word "sooner" seven times in a speech urging the US central bank to raise rates earlier than the futures market currently predicts.
 
New US data today showed claims for jobless benefits fell last week to a 14-year low. Industrial output rose in September at the fastest monthly pace since late 2012.
 
Fed "doves" Lockhart and Kocherlakota were due to give speeches later on Thursday.
 
"The balance of risk appears to have shifted to the upside" for gold, says a technical chart analysis from London market makers Scotia Mocatta.
 
"Inflation expectations are declining in the US," the Fed's Bullard told Bloomberg TV in an interview.
 
"That's an important consideration for a central bank...and I think a logical policy response may be to delay the end of the QE."
 
With China today reporting consumer-price inflation of just 1.6% per year for September – well below Beijing's 3.5% target – "Expectation of more stimulus is building," says one London bullion desk in a note.
 
"Gold benefiting from lower yields and marginally weaker US Dollar," says Standard Bank, "but physical demand remains lackluster."
 
Looking at the broader precious metals market, "The platinum gold ratio is trading at parity," notes analyst Bernard Dahdah at French bank and bullion dealers Natixis – "well below  the cash cost of production of a number of major South African producers.
 
"In our view platinum prices cannot remain at these low levels indefinitely but gold prices may have further to fall," says Dahdah, recommending a short-gold long-platinum trade.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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