Gold News

'No Action' in Gold Price Ahead of US Fed Rate Decision, Crude Oil Sinks on 'Glutted' Strategic Reserves

GOLD PRICES held in a tight 0.5% range for the second day running in London on Tuesday, trading again around last week's finish at $1165 per ounce as crude oil fell but US stock markets also held flat ahead of tomorrow's October interest-rate decision from the US Federal Reserve.
 
European equities fell, dropping 0.9% as the single currency drifted against the Dollar, while Eurozone bond prices rose, pushing yields down.
 
Crude oil prices meantime sank to new 2-month lows after Bloomberg noted a plan – part of Monday night's US budget deal in Washington – to sell 8% of the United States' strategic reserves over 5 years starting 2018.
 
"The proceeds will be deposited into the general fund of the Treasury," according to the proposed bill drafted to avert another 'debt ceiling' government shutdown.
 
"In 1999," notes Bloomberg writer Javier Blas on Twitter, "the UK sold [half] its gold reserves, marking the bottom. Will the US plan to sell oil from SPR [mark] the bottom too?"
 
Oil facilities to hold China's strategic reserves are "full" says a Reuters report, with 4 million barrels of crude "stranded in two tankers off an eastern port for nearly two months due to a lack of storage" according to two trade sources.
 
"We don't expect to see much action in gold prices," says US broker INTL FCStone, "until after the Fed meeting and the third quarter GDP report are out of the way.
 
"Both these variables will likely clarify the Fed's intentions...to raise rates, which in turn should impact gold's short-term direction."
 
"Many market participants [have] stayed on the sidelines ahead of the 2-day FOMC meeting," agrees German bank Commerzbank's commodity analysts, but latest data from US regulators do show speculators "increasing their exposure to gold over the past 5 weeks," they add.
 
"Any hawkish comment from the Fed may put those longs under pressure."
 
The European Central Bank is meantime likely to cut Eurozone interest rates at its next meeting, according to a Reuters poll of economists, with consensus now seeing an 80% chance of the ECB's key rate falling from the current 0.05% per year.
 
Euro gold prices today recovered a €5 drop to trade back at last week's closing level of €1055 per ounce – the highest Friday finish since the first week of July, and some 8.5% above mid-September's new 2015 lows.
 
"On a short-term view," says a technical analysis from bullion bank Scotia Mocatta's New York team, "the metal still appears to be testing correction levels [in Dollar terms], with our key pivot seen at $1156.
 
"While that level holds we expect the bull trend to renew to the topside with $1192 and $1209 key target levels," Scotia goes on, pointing to the 50% and 61.8% Fibonacci retracement levels of this year's trading range to date.

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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