Will the Fed really now raise interest rates in December?

New York closed at $1,156.80 at the close on Wednesday but then rose to $1,162 in Asia overnight. London then lowered it back to $1,159.60. The LBMA price setting fixed it at $1,159.00. The dollar Index has risen and now stands at 97.37 and remains well below its peak of over 100. The dollar was trading against the euro at $1.0931 reflecting the dollar’s strength.  In the euro the fixing was €1,056.52.  At New York’s opening gold was trading in the euro at €1,056.75 and at $1,156.70 but has slipped back below $1150 as the day progresses.  

The silver price closed at $15.99 on Wednesday. At New York’s opening, silver was trading at $15.85.

The Fed’s statement was read after keeping interests rates at current levels. The market is now reading a December rate hike as a near certainty, although only on a minute change in language from the FOMC.

References to the global economy were taken out of the statement, giving some the impression that the Fed is now less concerned about global consequences of a rate hike. We find that hard to believe as the Fed is fully aware that a rate hike will impact exchange rates and be detrimental to U.S. global trade, but is now elevating internal consequences of holding rates down.

However, there is always a danger that we over-read consequences into minor details. What is directly affecting the gold price in all of this is the gold being priced in dollars or euros. While the gold price is lower in the dollar over last week’s price the euro price of gold is at €1,056.71 up from last week’s €1,043.10. This illustrates that the gold price is reflecting currency values far more that we have seen before. We expect this to continue.

Chinese gold import numbers continue to be reported differently by the Shanghai Gold Exchange and GFMS the highly respected metals consultancy. The latter has China’s imports as lackluster while the SGE reports record import levels. So either the SGE is not presenting an accurate picture or GFMS is getting it badly wrong.

The Technicals continue to look very good in all currencies including the dollar where it is now sitting right on support.

There have been sales of 2.978 tonnes this week from the SPDR gold ETF and a sale of 0.84of a  tonne into the Gold Trust. The holdings of the SPDR gold ETF are at 694.344 tonnes and 161.99 tonnes in the Gold Trust.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

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