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Gold Price 'Set to Plunge' If Fed Hikes Rates, But 'Short Squeeze' on Weak Inflation Mark 'a Higher Low'

September 18, 2015
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GOLD PRICES slipped but silver broke above $15 per ounce for the first time in more than 3 weeks on Thursday in London as the Dollar weakened ahead of the US Fed’s long-awaited September decision on interest rates.
 
New York stock markets edged higher, as did Europe, but emerging Asian equities earlier closed sharply down.
 
US Treasury bond prices meantime steadied around Wednesday’s 6-week lows, with the 10-year bond yield edging back from 2.30%.
 
With the US Federal Reserve now holding its key interest rate at 0% for almost 7 years, “Expect a huge decline in gold prices if the FOMC hikes rates,” the Wall Street Journal quotes one US futures brokerage.
 
But “[yesterday’s] lower US inflation data may potentially keep the Fed from announcing the long expected interest rate raise on Thursday,” says a bullion desk note from Germany’s Commerzbank.
 
Calling Wednesday’s jump a “short squeeze”, the move “prior to the FOMC caught the market off guard,” says Swiss refining and finance group MKS’s traders.
 
“Gold had a big day [Wednesday],” agrees bullion bank Scotia Mocatta’s New York team, noting that gold “posted a ‘higher low’.
 
“If we can make a ‘higher high’ above the $1170 high from August, that would be bullish for gold.”
 
But the gold price’s “multi-year [down]trend at $1163/1173 will remain a key resistance,” add fellow London market market Societe Generale’s technical analysts today.
 
“Eventually the downtrend should persist towards recent lows of $1080, a decisive level for next leg of downtrend.”
 
Looking ahead to possible volatility in gold prices on the Fed decision, “support is at [Tuesday]’s low of $1097,” says Scotia.
 
Elsewhere Thursday, the Swiss National Bank kept its key interest rate at a record low of minus 0.75%, but warned that the Swiss Franc remains “significantly overvalued” after it was de-pegged from the Euro – ending a half-trillion-dollar program of quantitative easing, used to buy foreign currencies and depress CHF – at the start of this year.
 
The Bank of Japan, having already created and spent QE money equivalent to 65% of the country’s GDP on buying government debt, “will make necessary adjustments while examining both upside and downside risks on the economy and prices,” said governor Haruhiko Kuroda in a speech overnight.
 
The European Central Bank – now with QE equal to 5.3% of the 19-nation currency union’s GDP – may yet cut interest rates further, according to analysis cited by Reuters, because “the Euro is 8% stronger than when QE started six months ago, although a Fed hike might hurt it again.”
 
Gold priced in Euros edged 1% lower on Thursday from yesterday’s 1-week high at €994 per ounce.

Ahead of Fed, US Inflation Data See Bullion Prices Jump Out of Tightest Range in 7 Years

September 17, 2015
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GOLD BULLION jumped out of its tightest range in 7 years Wednesday in London, rising 1% to $1115 per ounce as new data – released a day before the Federal Reserve’s long-awaited September interest-rate vote – said US consumer prices fell last month.
 
That put the headline annual rate of CPI inflation at just 0.2%, way below the Fed’s official target of 2.0%.
 
Dollar prices for delivery of wholesale bullion had moved “in a $8.05 range on Monday and Tuesday,” says Bloomberg, calling it gold’s “smallest [two-day] move in eight years.”
 
“Gold continues to trade in a very narrow range ahead of the Fed announcement,” agreed a note from the commodities team at ICBC Standard Bank, “though the US inflation figures…appeared to trigger a rally in silver…and lent gold some support too.”
 
Silver prices outpaced the gain in gold bullion, rising 3.5% to a 1-week high at $14.85 per ounce “likely exacerbated by stops and short covering,” says Standard.
 
“A late and seemingly orchestrated rally in Chinese equities, just before close of play,” it adds, “spill[ed] over into the base metals.”
 
Copper prices earlier rose 1.2% as Shanghai’s stock market – actively supported by the Chinese government since beginning a 35% slump this June – leapt almost 5% in the last hour of business.
 
Now trading just below Friday’s 8-week high, copper is set to rise in 2016 according to analysts at US bank Citigroup, thanks to heavy cuts both to production and longer-term exploration and development following the last five years’ near halving of prices.
 
On the supply front in gold, mining unions in South Africa – already the world’s most expensive major gold producing nation – were split Wednesday over accepting the 14% wage increase offered by world No.3 miner AngloGold Ashanti, world No.7 Harmony Gold, world No.9 Sibanye Gold, and the smaller Evander Gold Mines.
 
The National Union of Mineworkers (NUM) recommended its members accept, but the equally large Association of Mineworkers and Construction Union (Amcu) said it was “very disappointed the offer [was] more or less similar the offer that our members rejected in the early stages of negotiations.”
 
Against an 8% annaul drop in the global average cash cost of mining gold in the second quarter of this year – down to $664 per ounce – South African costs actually rose 3% year on year, according to data compiled and analysed by the Metals Focus consultancy.
 
“This came in spite of a 15% weakening of the Rand,” Metals Focus noted in a report last month, “as activities were impacted by increased salary costs, electricity tariff hikes and a 6% decline in the average grade of ore processed.”

Gold Prices Drift as Fed Lift-Off Forecasts Cut to 1/8th of a Percent, 'Relief Rally Possible' But China's Traders 'Unconvinced'

September 16, 2015
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GOLD PRICES held in a tight range again on Tuesday, drifting around $1105 per ounce as European stock markets shrugged off another sharp drop in Chinese equities to follow a strong 1% opening in US shares ahead of this week’s key Federal Reserve decision on interest rates.
 
“Let’s get it out of the way,” Wharton finance professor Jeremy Siegel told CNBC, suggesting that the Fed could raise by 1/8th of a percent on Thursday – rather than the 0.25% expected – to avoid gauge the stock market’s reaction.
 
Economists from European banks ING Bank, UniCredit and VTB Capital also think Fed ‘lift off’ could reach just 0.125% for fear of denting asset prices, according to Bloomberg.
 
US Treasury bonds edged lower in price as stocks rose Tuesday, pushing 10-year yields up to 2.22% – near the highest interest rates in a month, but unchanged from the end of last year.
 
“Just get on with it!” urged stockmarket bear Albert Edwards, strategist at investment bank Societe Generale in a note last week, again forecasting “[a] coming deflationary bust whether the Fed hikes or not.”
 
Commodity prices were broadly flat on Tuesday, with silver softer than gold prices and re-touching last Friday’s 2-week low at $14.30 per ounce.
 
The giant iShares Silver Trust (NYSEArca:SLV) closed Monday needing 9,981 tonnes to back its exchange-traded shares – the silver ETF’s lowest level since early June.
 
Bullion holdings for the giant gold ETF, the SPDR Gold Trust (NYSEArca:GLD), remained at 678 tonnes for the fifth session running, down by 1 ounce in 8 from late-February’s sudden spike and barely 10 tonnes above early-August’s new 8-year lows.
 
“A no-hike decision could spark something of a relief rally across precious metals if the Dollar and Treasury yields drop back,” reckons precious metals analyst Jonathan Butler at Japanese conglomerate Mitsubishi.
 
“A lack of a conviction in gold among Chinese investors will continue for some time,” says consultancy Metals Focus in their new Precious Metals Weekly, “due to US interest-hike expectations.”
 
Looking at India – the world’s No.2 gold buying nation after China in 2014 – the government’s decision to involve banks and refiners, rather than the jewelry industry, “could materially affect the success” of new schemes aimed at mobilizing some of the country’s huge private gold holdings to reduce its heavy imports bill.
 
“While too early to judge the possible success,” says Mitsubishi’s Butler of India’s bank deposit and gold-price linked bonds schemes, “it would seem likely that they will simply reinforce the historic and cultural popularity of physical gold, and therefore have little impact on the volumes of gold imported in the short to medium term.”

Gold Price 'Uneventful' as US Fed Rate-Hike Looms, China Punishes Brokers & Investors Amid New Stockmarket Drop

September 15, 2015
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GOLD PRICES traded in a 0.5% range Monday morning, treading water around the lowest weekly close in five ahead of Thursday’s long-awaited US Fed decision on Dollar interest rates – now held at zero for almost 7 years.
 
Mixed data from China meantime saw Shanghai’s stockmarket drop 2.5% as Beijing’s long-awaited plan for reforming its huge state-owned enterprises – urging a focus on “socialist values” over “profit” – today fell short of privatization, “disappointing” investors by defending “entrenched interests” according to some analysts after the recent equity-market turmoil.
 
Leading securities brokerages Founder, GF, Haitong and Huatai were fined the equivalent of $28 million by the China Securities Regulatory Commission on Friday, and had $10m of profits confiscated for not verifying client I.D. properly, with individual executives also fined and warned.
 
Two private investors were also punished for “manipulating” stock prices by using fake buy orders to boost prices.
 
“I’m not looking for any big effect,” says Nobel economist and Yale professor Robert Shiller in an interview with the Financial Times of the Fed rate hike, saying that “it has been talked about for so long, everyone knows that it’s coming.
 
“It’s just not much of a big deal,” says Shiller, also warning that 6 years of gains now mean the US stock market is “a bit of a bubble” similar to the Tech Stock top of 2000.
 
For gold prices, says a trading note from Swiss refinery and finance group MKS, “This week’s FOMC meeting is likely to keep price action fairly limited.”
 
“Physical gold demand in the emerging markets is sluggish,” adds bullion market maker HSBC in a note.
 
“With mixed signals from inflation, the labor market and financial conditions,” says fellow London bullion bank Barclays, “there are heightened uncertainties about the Fed decision.
 
“We expect lower trading activities and a sideways market before the meeting.”
 
“My personal opinion,” says David Govett at brokers Marex Spectron in London, “is that the Fed will not raise rates and [so] Thursday night should see a rally in precious prices.
 
“However…if the Fed doesn’t raise this month, they will emphasise that the raise is not far off. [So] the rally will probably be short lived.”
 
“Uneventful trading ranges” are notable across several other markets, says US brokerage INTL FCStone, “largely on account of trading volume dwindling ahead of the critical Fed meeting later this week.
 
“However, intraday movements in both gold and silver have been substantial.”
 
Chinese gold prices edged down in Shanghai trade Monday, but closed the day at a greater premium to London quotes, offering importers a gross margin of $3.75 per ounce.
 
Australian shares meantime rose Monday, and the Aussie Dollar spiked, as prime minister Tony Abbott was replaced by ex-Cabinet colleague Malcolm Turnbull – now the country’s 6th leader in 8 years – following a vote by Liberal Party politicians.
 
London’s stock market ticked lower with Eurozone shares, but the Pound initially rose – nearing last week’s 1-month highs against the US Dollar – despite Jeremy Corbyn, dubbed a “radical left-winger” by some newspapers, winning the opposition socialist Labour Party’s leadership contest.
 
That held gold priced in Sterling around £715 per ounce, the multi-year low hit both by the crash of 2013 and again on gold’s volatile spike downwards last November.

Gold Price 'Critical' on Drop Through $1100, Erases 2015 Euro Gain on China Fears, Bearish Bets, Miner Hedging

September 12, 2015
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GOLD PRICES fell below $1100 per ounce for the first time in exactly a month Friday afternoon in London, losing almost 2% for the week as world stock markets also fell with commodity prices.
 
Priced in the Euro currency – which rose for the 3rd day running on the FX market – gold meantime fell to €975 per ounce, erasing the last of 2015’s previous 20% gain.
 
“On a very long-term scale,” says one Hong Kong dealing desk in a note, “current levels look critical for gold [after] the price [in mid-July] held the 50% retracement of the rally from the mid-1999 low to the September 2011 peak.”
 
Looking at US gold futures trading, the note adds, “The increase in [Comex] open interest…coupled with the drop in price, suggests that speculators betting on declines in the gold price have increased their positions again quite aggressively, or strongly outweighed fresh longs.”
 
Physical gold bullion is seeing “decent demand in the low $1100s,” said traders at Swiss refiner and finance group MKS earlier Friday, “[but] producer selling seems to be capping the rallies.”
 
Gold miner hedging – where producers borrow metal to sell some future output at current levels, locking in today’s prices for fear of a drop – “could be approximately 50 tonnes” in 2015, reckons Robin Bhar, precious metals analyst at French investment and bullion bank Societe Generale in London, “a reversal of the de-hedging of last year.”
 
Overall, Bhar says, physical mine output could from 2014’s record high by 6% this year “due to lower prices.”
 
Gold prices in China – the world’s No.1 consumer market – today closed higher in Yuan terms on the Shanghai Gold Exchange, but cut their premium to the world’s benchmark of quotes for London delivery to the equivalent of just $1.60 per ounce.
 
That reduced the incentive for new imports from last week’s peak of $6 per ounce, around the highest levels seen in 2015 so far.
 
Official data on Friday showed China’s new banking loans almost halving last month from July’s fresh record, while the M2 measure of banking deposits continued to increase at 13.3% per year.
 
“Given a buildup of bad debt on their books,” the Wall Street Journal quotes economist Larry Hu at Australia-owned bank Macquarie, “Chinese commercial banks are more cautious in extending credit this year.
 
“But China’s [government-owned] policy banks, like China Development Bank, are expected to play a more important role in pumping credit to support the cooling economy.”
 
Concerns over China’s weakening economy today led analysts at both US investment bank Goldman Sachs and German banking giant Commerzbank to cut their crude oil price forecasts again.
 
Crude oil prices fell 2.5% on Friday. Silver failed to extend its outperformance of gold, tracking the heavier metal’s sharp drop to hit sudden 2-week lows at $14.33 per ounce – midway between last Friday’s finish and the previous week’s new 6-year low at $14.00 per ounce.

Gold Trading Slips in London as ETFs Shrink, US Fed Rate-Hike Vote 'Can't Come Soon Enough'

September 11, 2015
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GOLD TRADING in London saw prices spike but fail to hold a 0.7% gain on Thursday, retreating near yesterday’s 1-month lows against the Dollar as US stock markets shrugged off another hard drop in Asian and European equities ahead of next week’s Fed decision on interest rates.
 
Silver was again firmer and spiked harder than gold, touching $14.88 per ounce before trading back 20 cents to stand 0.8% higher for the week so far.
 
Commodity indices rallied further from last week’s new multi-year lows, and US Treasury bond yields held steady near 1-month highs
 
“The Fed should wait until inflation is closer to target before raising rates,” advises the latest edition of The Economist magazine.
 
“Next Thursday cannot come soon enough,” says the daily commodities note from ICBC Standard Bank’s London office.
 
“The regular [US Fed] guessing game is a necessary but increasingly tiresome feature of [current precious metals] markets.”
 
The Bank of England voted 8-1 to keep the UK central bank’s QE bond holdings unchanged at £375 billion for the 38th month running, and to keep its key interest rate unchanged at a record low of 0.5% for the 79th month running.
 
Bullion held to back the giant SPDR Gold Trust (NYSEArca:GLD) yesterday shrank almost 5 tonnes – its largest outflow in 6 weeks – to close Wednesday at 679 tonnes, a new 7-year low when first reached at the end of July and 14% smaller from this point in 2014.
 
Holdings in the iShares Silver Trust (NYSEArca:SLV) ended Wednesday at 10,017 tonnes, the lowest quantity needed to back its stock since mid-June and 3% below the level of this time last year.
 
Over in China – the world’s No.1 consumer market – the Shanghai Gold Exchange says it will from the end of this month let trading members post precious metals, foreign currency and share certificates as collateral for new positions.
 
The move, says a statement published overnight and relaying a notice to members from late August, is intended to “boost market services” from what is currently the only legal route for any gold bullion to enter private circulation in China.
 
Trading volume in the SGE‘s main gold contract increased today as prices fell, rising near its 12-month average.
 
Shanghai’s new international contracts, in contrast – launched 12 months ago for foreign insitutions to trade using Yuan held in offshore accounts – saw next-to-no business once again.
 
“There is no listed derivative in precious metals in London,” said base metals trading specialist London Metals Exchange CEO Garry Jones to reporters at a conference in Mumbai on Thursday.
 
“We really want to be able to clear gold, silver and other precious metals. As an exchange…we want to partner with the market.”
 
Trading volumes through the LBMA Gold Price auction – the electronic benchmark platform administered by LME competitor Intercontinental Exchange (ICE) and now regulated by UK law – fell this afternoon below 35,000 ounces, barely one-fifth of the daily average between April and July.

Gold Bullion Jolts Lower as US Job Openings Hit Record Before Fed Vote, 'Crucial' Interest Rate Missing from India Savings Scheme

September 10, 2015
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GOLD BULLION dropped sharply to 3-week lows on Wednesday as new data put US job openings at 5.8 million for the end of July – the largest number of would-be hirings since the JOLTS series began in 2002.
 
US stock markets erased an opening 1% gain as US Treasury bond prices fell to 1-month lows ahead of next week’s Federal Reserve decision on interest rates.
 
Silver prices held firmer than gold bullion once again after twice spiking near $15 per ounce overnight.
 
Dropping $10 per ounce towards the 3pm LBMA Gold Price auction in London, bullion then recorded its lowest daily benchmark since 11 August, just below $1110 per ounce.
 
“While the ‘teens’ seem[ed] to be the big support,” said a technical analysis of the gold price from Canadian-owned market maker Scotia Mocatta overnight, “the lower highs [had] lessened our once very bullish enthusiasm.”
 
“Price action has eroded the more confident picture of last week,” agreed an Asian trading note from Japan’s Mitsui Global Precious Metals.
 
“With the next [US Fed] meeting a week away, uncertainty will play on the market. Downside targets cluster around $1107 and extend to $1093.”
 
But “whatever the Fed move,” says another bullion market-maker’s dealing desk, “I think it will be beneficial to gold.
 
“Another round of easy money and gold shall take off (being over-sold)…a round of [interest-rate] tightening and gold shall take off (equities tumbling, [emerging-market] strains)…a ‘minimalistic’ round of tightening and gold shall take off (a mixture of previous reasons)!”
 
Silver today spiked twice to $14.95 per ounce – the sudden 1-week high reached and immediately lost last Wednesday – in Far Eastern trade, while Japan’s stockmarket led a surge in Asian equities overnight with a 7.7% gain.
 
Copper edged higher by late afternoon in London, but other commodities dropped for the first session in three, knocking 1.5% off Brent crude oil’s Dollar price.
 
One week before the US Fed’s long-awaited September decision on raising Dollar rates from zero, the Bank of Canada meantime held its key interest rate unchanged at 0.50% today. 
 
Futures market prices cut the odds of the BoC reducing rates in October to just 1-in-6, with the likelihood of a cut before October 2016 now below 50%.
 
Over in India, the government approved details of the much-discussed Gold Monetisation scheme, aimed at mobilizing some of the world’s No.2 gold-buying nation’s private stockpiles to meet future demand and ease the country’s Current Account Deficit.
 
Crucially, however, the “the rate of interest to be paid has yet to be determined,” notes Tom Kendall, precious metals strategist at Chinese-owned investment and bullion bank ICBC Standard Bank.
 
Encouraging  households to put gold on deposit in these new savings schemes, “[India’s] banks will need to cover the costs of gold assays, vaulting and transaction costs, which will impact the rates they are able to offer,” Kendall points out.
 
“Those are likely to be a long way below Rupee cash interest rates” – currently at 4% with 8% paid on 1-year fixed deposits.

Gold Price Gains But Misses 2.7% Jump in Silver After Record New China Trade Surplus

September 9, 2015
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GOLD PRICES edged higher late in London on Tuesday, rising to a 3-session high of $1126 – but missing the 2.7% jump in silver – as US traders returned from the Labor Day holiday.
 
Asia led a strong rise in European and US stock markets, gaining 1.6% for the day.
 
Copper surged 4.5%, extending Monday’s jump on news that major producer Glencore is mothballing some output, helping push broad commodity indices higher as crude oil also rose.
 
New data from China – the world’s No.1 consumer of most major commodities – today showed copper inflows growing in August from July.
 
Overall however, the value of imports to the world’s second-largest economy sank 14% year-on-year, helping push China’s trade balance of exports over imports some 40% higher to a new all-time record of almost $58 billion.
 
“Gold is currently in no-man’s land,” says a note from Swiss investment and bullion bank UBS, “and investors are understandably hesitant to put on sizeable positions ahead of the FOMC meeting next week.”
 
“Physical demand for gold remains rather subdued,” says Chinese-owned ICBC Standard Bank’s commodity unit, “immune from the mini-risk on bounce that has lifted most other commodities.”
 
Silver bullion jumped Tuesday, nearing its highest level in 2 weeks at $14.86 per ounce.
 
That pushed the Gold/Silver Ratio of relative prices down towards 75 for the first time since mid-August, and markedly down from last month’s 6.5-year peak near 79 ounces of silver per 1 ounce of gold.
 
Gold priced in Turkish Lira meantime hit new 4-year highs, worsening the demand outlook in the world’s No.4 consumer nation.
 
“Sales are not terribly slow,” the Cihan news agency quotes İsa Altıkardeş, president of the Bursa Chamber of Jewelers, “[but] if prices continue to rise, I believe sales will continue to slow.
 
“We tradesmen want to see prices fall and this period of slow sales to end…Jewelers are tired of the daily fluctuations.”
 
Weaker Asian currencies are continuing to impact local gold demand, said a note Tuesday from analysts Thomson Reuters GFMS.
 
Shanghai gold prices ticked lower overnight, but extended their premium above London quotes – incentivizing new imports of bullion to China, the world’s No.1 consumer nation – to more than $5 per ounce.
 
US analysts at Bank of America-Merrill Lynch have cut their 2015 average price target in Dollar terms, down 7% to $1122 with a forecast of sub-$1000 in 2016.
 
Gold prices have so far averaged $1182 in 2015, down from $1266 per ounce in 2014.

Gold Price Slips as China Adds Another 16 Tonnes of Bullion, FX Reserves Plunge

September 8, 2015
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GOLD PRICES slipped in quiet trade in London on Monday, retreating near the lowest levels since mid-August at $1119 per ounce as European stockmarkets held flat, ignoring another sharp drop in Asian equities.
 
New data overnight showed China’s People Bank growing its gold bullion reserves again in August, extending the growth since end-June’s restatement to 2.1%, even as broader reserves fell more than 10%.
 
Crashing since hitting 7-year highs in June, China’s stock market drop “is mostly over,” said People’s Bank governor Zhou Xiaochuan at a central bankers’ meeting on Sunday, calling the 35% plunge a “correction”.
 
Returning however from last week’s Victory Day commemorations, the Chinese stockmarket dropped 2.5% on Monday.
 
“This week’s trade and inflation data out of China,” says Japanese conglomerate Mitsubishi’s analyst Jonathan Butler, “will give a gauge on the scale of the country’s economic slowdown.
 
“Any downside surprises have the potential to ignite safe haven bids in gold through a further equity market washout [or] fear of contagion into other economies.”
 
Speculative traders in US futures and options last week grew their net long position of bullish minus bearish bets across that group week to the highest level since late June, data from US regulator the CFTC showed Friday.
 
Equal to 241 tonnes, that net long position stood 5% below the last 20-year average, but was barely half the level averaged during gold’s decade-long bull market from 2001 to 2011.
 
Open interest in silver derivatives meantime fell 8% last week to reach the smallest level since May 2014.
 
Silver bullion today edged lower to $14.50 per ounce, a new 5-year low when first hit last November by a sharp slump in prices.
 
With Shanghai opening for the first time since Wednesday, Chinese gold prices had earlier “gapped lower on the open to catch up with the FX and international gold markets,” notes ICBC Standard Bank, but premiums above comparable London quotes held near $5 per ounce for the main domestic contract, incentivizing wholesalers to import more bullion.
 
The Shanghai Gold Exchange‘s so-called ‘international’ contracts however saw zero volume for the second session running.
 
The People’s Bank last month added another 16 tonnes to its gold bullion holdings, fresh reserves data said today, again doubling the monthly rate of additions from its 2009-2015 average.
 
Overall however, China’s reserves of foreign currency fell by a record $93 billion last month, as the People’s Bank intervened to support its Yuan by selling Dollars, Euros and other currencies.
 
At that rate, note analysts at US investment bank Citigroup – and with almost $3.6 trillion still remaining in its FX reserves – the People’s Bank could continue the summer’s rate of spending to defend the Yuan for 3 years.

Gold Bullion Whipped by Dollar-Euro 'Decoupling' as US Jobs Data Boost Fed Rate-Hike Outlook

September 5, 2015
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BULLION prices whipped hard on the release of new US jobs data Friday, with gold initially spiking to recover this week’s losses before dropping to fresh lows for the day beneath $1120 per ounce.
 
Losing 1.1% from last Friday in Dollar terms, wholesale gold bullion swung that much inside 60 minutes for Euro investors after the US Bureau of Labor Statistics said non-farm payrolls grew less than expected in August, but the overall jobless rate fell to a 7-year low of 5.1%.
 
“More than 12 million jobs have been added since the trough in early 2010,” said US Federal Reserve voting member Jeffrey Lacker earlier, giving a speech entitled ‘The Case Against Further Delay‘.
 
“It’s time to align our monetary policy with the significant progress we have made.”
 
The odds of the US Federal Reserve raising interest rates from zero for the first time since 2008 at its September meeting rose to 34% from 26% before the data, according to futures market prices, with the odds of a first hike in October or December rising to 46% and 62% respectively.
 
But “while the Federal Reserve is succeeding in the employment part of its dual mandate,” says a blog at US bond-fund giant Pimco, “it is significantly undershooting the inflation part”, with the Fed’s own preferred PCE measure reading just 0.3% against the 2.0% per year target, and only 1.2% when ‘volatile’ fuel and food are excluded.
 
Silver held firmer than gold bullion Friday, ending the week unchanged at $14.60 but fading 2.5% from yesterday’s sudden spike near $15 per ounce.
 
Last month’s rally in gold came as “Fading expectations of a September Federal Reserve rate hike, the decline in the dollar index [and] the approaching peak seasonal demand period further supported prices,” says a report from commodities analysts at French investment and bullion bank Societe Generale.
 
But now forecasting 2016’s average at $1000 per ounce, however, SocGen’s natural resources research team put gold some 12% below where the futures market currently predicts next year’s prices – one of only 5 bearish calls across the entire commodities complex.
 
In Dollar terms, “Gold has fallen back into a bearish trend channel that commenced in May,” said a technical note from bullion bank Scotia Mocatta overnight.
 
“Given the failure to make a new high on the last rally, and the overall bearish long-term technical posture, we expect gold to test the lower range of the channel and the $1072 lows from July.”
 
For Eurozone investors, “The ECB’s QE will ensure a degree of uncoupling of monetary conditions from those in the US in coming weeks/months,” says French investment and bullion bank Natixis, noting how the European Central Bank decided Thursday to raise from 25% to 33% the proportion of any one Euro nation’s bonds in issue which it can buy with QE – meaning it “now has free rein to be able to increase the size of its Asset Purchase Program.”
 
“Our economists [also] believe the ECB will further loosen its monetary policy,” writes Carsten Fritsch, precious metals analyst at Commerzbank in Frankfurt, “and may already do so at its meeting in December.”
 
With Eurozone QE increased to buy more than the current €60 billion of government bonds each month, “This would suggest a significantly higher gold price in Euros,” says Fritsch, “even though the price response to what virtually amounts to an announcement of ‘QE2’ [at Thursday’s ECB press conference] was subdued.”
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