Slim Gold Price Range Ahead of FOMCDecember 11, 2015 12:47 pm
Slim Gold Price Range Ahead of FOMC Meeting Next Week
It is the 11th of December and suddenly it has turned cold and at last it feels like winter. I’m still persevering with my Christmas jumper (a blue cross-stitch endowed with white snowflakes) but I’m having the last laugh; at least I’m warm. The gold price at the moment is doing anything but warming my cockles. It would appear that the Federal Open Market Committee (FOMC) are at last baying to commentators such as myself, who have been writing articles about the eventuality for the last year and a half. Finally they deem we are in a position to raise the interest rate from historic lows of 0.25%. But will they do it? I can’t believe I’m saying this but I actually think they might do it. Finally. I feel a modicum of reprieve but the gratification doesn’t last long as it is now finally time to turn to commodities and what they have been doing and what they might do.
At the moment gold has been trading in a well worn path. In the last two weeks the gold price range was trading $32.1, £16.55 and €33.80 respectively. A macro look at gold will tell you that this size of gold price range has been on-going for the last couple of months and at times has been even more tentative throughout the year. The average in each currency was $1067.77, £708.67 and €994.27 with the mode (the most frequent value) being $1055, £708 or £705 and in Euros it could be four different variants €998, €994, €986 or €977. This suggests a lot more about currency than it does about the rates rise, although everything is inextricably linked in the long term.
The notably slim gold price range combined with other data, all point towards downward pressure on the precious metal markets. Unsurprisingly over the last few days there have been significant outflows from ETFs including large name players such as Schroders, SPDR and Comex Gold Trust. Naturally all this information points towards the FOMC meeting and the interest rates. The market is waiting and these numbers suggest this definitely the case.
With the increase in the interest rates will almost certainly lead to a stronger dollar. The FOMC are all too aware of the dollar’s potential for continuing strength in 2016. Looking forward there is going to be significant pressure on commodities across the board and most significantly on oil. The lower pricing of brent crude oil and the effect that has on the metals market, ultimately means operational costs will fall for extraction and delivery. This will do little to boost the gold price.
In all, I already am coming to my own conclusions on what will happen to the gold price especially after looking at the slim gold price range. But the markets both domestically in the US and further afield, is what I’m most interested in – I’ve already written some scenarios about What Will Happen to Equities & Gold when the interest rates rise. As is often the case in life, you wait for something to happen for so long, when it arrives the ecstasy of that moment is so much duller than you initially thought it would be. 2016 is going to be the year of normalisation and reaction. I for one am looking forward to it.
Article by Michael Cooper