Gold Prices Halve Weekly Loss Even as Case for Fed Rate Hikes 'Strengthens'

GOLD PRICES rebounded on Friday morning in London from a two-day $20 dip as the US Dollar retreated and European stocks fluctuated before the highly anticipated speech of Fed Chair Janet Yellen at the Jackson Hole symposium, writes Thomas Podvin at BullionVault.
Asian equities fell and Europeans stocks fluctuated, while the Bloomberg Dollar Index that measures the strength of the greenback against several other major currencies eased back.
So far this Friday the Pound versus the US Dollar was set for a weekly gain whilst the Euro/Dollar cross remained almost unchanged after a jump earlier this week was followed by a dip.
Janet Yellen’s address at 3pm London time on Friday is highly anticipated as investors wait to see if she gives any signals regarding Federal Reserve monetary policy and a new interest hike before the end of the year.
Analysts see the choice for a hike or not as very much dependant on the economic situation of the US, the rate of inflation matching the official target and employment figures.
“Speculative investors seemed to have abandoned their long gold positions,” said Bart Melek, head of global commodity strategy for TD Securities in Toronto, as Yellen may hint at a hike in her address in Wyoming.
“Some gold observers are even arguing that the FOMC may increase rates as early as September,” added Melek.
“The outcome of the Fed’s Sept. 21 meeting will be largely determined by the tone of Janet Yellen’s speech at Jackson Hole,” said an analyst, pointing to the confident tone of some of Yellen’s colleagues regarding a rate hike in the past few days.
“You can’t take on risk ahead of important events,” said Takashi Ito an equity strategist at Nomura Securities in Tokyo, as there is no way to know if Yellen will make any reference of a rate hike in her speech.
“It’s difficult to predict. If she does make more hawkish comments the market could be chaotic in the short term,” continued Takashi Ito.
Wariness ahead of Yellen’s speech gave gold a leg up” as the yellow metal in Dollars was set, before Yellen’s speech, for a small rebound and a weekly loss of 1.2%, marking the first retreat on the week since early August.
Gold prices for GBP and Euro investors also showed a weekly loss of 2.1% and 0.9% respectively on Friday morning. 
While in the past two days gold and silver prices were significantly under pressure with the firm greenback weighting on the precious metals, ” Clearly some market participants are positioning themselves ahead of Yellen’s speech,” said Frankfurt Commerzbank in a daily note, indicating they were sceptical about any clear indications of the next rate hike today.
With gold price resistance on a downward trend line from the post-Brexit referendum high in early July, the “metal has failed several times to move through this trend and could fall under further pressure should Yellen’s speech turn materially hawkish,” said Swiss industrial and trading services group MKS Pamp.
Silver prices dropped to an 8-week low of 18.69 per ounce, a level last seen a week after the Brexit referendum, as platinum was also lower on the week on Friday morning.
UPDATE, 2pm: The American economy grew slower than previously reported but in line with the consensus in Q2 2016 according to annualised GDP figures released at 1.30pm London time by the US Bureau of Economic Analysis.

UPDATE 4pm: Gold in Dollars whipped and rose to $1342 per ounce, a slightly higher level than last week’s close, before retreating to $1333 but still more than halving this week’s loss.

Futures gains extended as Yellen declared “the case for an increase in the federal funds rate has strengthened in recent months” in Jackson Hole this afternoon. Gold for UK and Eurozone investors also rebounded on Friday afternoon.



This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. This report was produced in conjunction with ABC Bullion NSW.

Contact Us

Adelaide Store

Mezzanine Level
20 King William Street
Adelaide SA 5000
08 8223 2444
9:30am to 4:00pm (Mon. - Fri.)

Brisbane Store

Level 2
17-19 Mt. Gravatt-Capalaba Road
Upper Mt. Gravatt QLD 4122
07 3349 7965
10:00am to 4:00pm (Mon. - Fri.)