Gold Closes Unchanged – Waiting on FOMC and BOJ
Commentary for Tuesday September 20, 2016 (www.golddealer.com) Gold closed up $0.40 on the Comex today at $1313.70 – so we continue to mark time as the Fed discusses its options. Whatever happens – the news will be out after the market close on Wednesday. So for now not even a rumor as to the Fed’s intentions – yet the odds makers cut the probability of a rate increase by half – moving from 24% last week to 12% this week. I would have placed the odds of an interest rate higher this September meeting much higher given the rhetoric we have heard lately from our friends at the Federal Reserve. Janet Yellen virtually talked the entire country into the notion that the US is doing so much better that a rate increase should be expected – that does not equate to a chance of much less than 50% held by London last week. And the price of gold seemed to agree with me moving down from $1350.00 in the beginning of September to $1310.00 in something like 3 weeks.
The markets are also watching the next move by the Bank of Japan – will they hold the line or move deeper into quantitative easing and negative interest rates – we should know by tomorrow. My bet is that they will not do anything dramatic – central banks of the world may be running out of QE ammunition and in Japan’s case the results have been disappointing.
If the FOMC comes out of this current meeting with nothing to say the price of gold will at least stabilize. Don’t expect any large move to the upside – the FOMC still sounds hawkish and they can raise rates whenever they please but the next big gathering will be in December after the elections.
The double bottom ($1310.00) in gold between late August and mid-September is supportive. But you might find that for now gold will stick with its longer term ranges – let’s say between $1250.00 and $1350.00 waiting for some kind of news which will tip the scales.
This does not look like inflation numbers but might be something like the relationship between crude oil and the stock market. In the old days the North Korean nuclear threat (they are making more progress than most believe and China has done nothing to stem their nuclear development) or something ominous from Iran would tip the scales in favor of gold ownership. But today the public has grown weary of such sad news and typically tunes out – think about it – even ISIS and the Middle East does not move the needle.
This from Reuters (Clara Denina) – LONDON, Sept 20 – “Gold steadied on Tuesday ahead of a two-day U.S. Federal Reserve meeting that investors are betting will leave interest rates unchanged.
“We are back in this pattern where the expectations about the next rate hike determine the short-term swings – when they are pushed backwards, gold rises and when they are pulled forward gold declines,” Julius Baer analyst Carsten Menke said.
“The Fed will prepare markets for a rate hike, possibly in March next year, expectation of which will be positive for the dollar and in turn negative for gold.”
Investors will listen closely to Fed Chair Janet Yellen’s speech at the end of the meeting on Wednesday for any hint that the central bank could raise rates before the end of the year.
A range of mixed economic figures and conflicting remarks by key Fed policymakers have kept investors guessing over the timing of the next U.S. rate increase. Only a 12 percent chance of a rate rise is priced in now, compared with 24 percent last week, CME FedWatch said.”
Silver closed down $0.01 at $19.28.
Platinum closed up $7.20 at $1030.90 and palladium closed down $2.75 at $683.50.
The walk-in cash trade was quiet today and so were the phones – there was some early morning ruckus – the Australian 2017 Gold and Silver Roosters are in stock.
The GoldDealer.com Unscientific Activity Scale is a “3” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 3) (last Friday – 4) (Monday – 4).
The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”. Our “activity” is better understood from a wider point of view. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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