Dovish message from Fed sees gold little changed

The New York gold price closed at $1,073.30 up from $1,060.90 on Wednesday’s close.  In Asia prices pulled back to $1,064.00 before London took it back up to $1,064, as the dollar index rose to 98.83. The euro fell back to $1.0849 down from yesterday’s $1.920 down ¾ of a cent from Wednesday’s against the dollar. The London a.m. LBMA gold price was set at $1,065.85 up 10 cents from Wednesday’s $1,065.75.  In the euro the fixing was €982.26 up from yesterday’s $975.60. Ahead of New York’s opening, the gold price was trading at $1,067.85 and in the euro at €984.19.  

The silver price in New York closed at $14.15 up 40 cents. Ahead of New York’s opening the silver price stood at $14.12.

Price Drivers

The hike of 0.25% in interest rates yesterday appears to have been priced in by most markets across the globe. The message we got from the Fed was that while they have broken the pattern of near zero interest rates, there may be two small rate hikes in 2016, but the Fed will keep its eyes on data for guidance. It was clearly concerned with the U.S. economy, its inflation rate, and the dollar.

It was a very dovish message which we feel lowered interest rate expectations and ensured there was no rush to the dollar in foreign exchanges. As we said yesterday, the move, we see was, “All about the dollar’s exchange rate. We reiterate our oft stated fact that the U.S. can no longer afford a strong dollar if it is to keep its ‘moderate’ recovery intact.”

We do not expect a much stronger dollar than at present, in 2016, which, by extensions means that the euro is unlikely to fall in 2016, taking gold and silver with it. The dollar exchange rate may well lead [alongside other pertinent factors] the Fed on interest rates and not interest rates lead the exchange rate in future Fed decisions.

We have never experienced COMEX so short and ready for a fall. So, what will speculators and dealers do from now on? Will they follow the Technical picture on gold and silver or will they follow the €: $ exchange rate as they have been doing for the last few years?

The first indication is positive on this front, as a ‘put’ option, giving owners the right to sell January futures at $1,000 an ounce, the most-traded option on Wednesday, plunged 46% after the Federal Reserve rate decision. The second-most traded option was a call giving the right to buy January futures for $1,100, which rose 50%, followed by February $1,000 put that slid 37%. Let’s see what follow through there will be from now on?

We note that there have been no sales or purchases from or to the SPDR gold ETF in the U.S. The holdings of the SPDR gold ETF remain at 634.63 tonnes and now at 155.87 tonnes in the Gold Trust.

The silver price will follow gold and the euro again.

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

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Gold and silver price rise could be meteoric if Fed decision prompts buying

The New York gold price closed at $1,064.10 down from $1,078.20 on Monday.  In Asia prices dropped to $1,062.60 before London took it down to $1,067 as the dollar index weakened to 97.38 against yesterday’s 97.85 on the dollar Index. The euro is at $1.1031 up from Monday’s $1.0955 against the dollar but later fell back to $1.0962. The London a.m. LBMA gold price was set at $1,069.15 up from Monday’s $1,068.00.  In the euro the fixing was €972.44 4.05 up from yesterday’s $9724.05. Ahead of New York’s opening, the gold price was trading at $1,063.05 and in the euro at €966.94.  

The silver price in New York closed at $13.71 down 24 cents. Ahead of New York’s opening the silver price stood at $13.72.

Price Drivers

While gold and silver prices are being forced down the euro is trying to rise strongly. The foreign exchange market clearly has a different view of the Fed’s actions tomorrow than dealers and speculators on COMEX. The price falls appear to be a ‘marking down’ of prices before potential selling can take place. If buying comes in instead the speed with which prices rebound will be meteoric.

We note that there have been no sales or purchases from or to the gold ETFs in the U.S. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 156.32 tonnes down from 157.07 tonnes in the Gold Trust.

The Technical picture continues to point downwards but the market is cautious and just about ready for tomorrow’s action. What action? The above picture can change in a heartbeat as it is not based on moves in physical gold. The silver and gold markets are therefore in a high risk situation that could move fast after the Fed’s announcement.

The foreign exchange market is reading a weaker dollar not the stronger one that a rate increase would suggest. With the euro now going stronger this implies a market disappointment in the Fed’s move tomorrow, much as we saw after the announcement from the E.C.B.

We do suggest that tomorrow is no place for those with sensitive nerves. In this type of market, at least in the very short term, the tone is more like a casino. The direction given from the Fed will be clearly seen in the gold and silver markets. It may be hard to get in either way quickly, but each one must consider his risk tolerance and accept making a move after the horses have left the starting gate to lower his or her risks.  We have our own views taking all available information into account and will advise our own to follow that route.

The silver market has become high risk for the next day and more.

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