A Critical Look At Gold Before The FOMC Meeting
$GLD
There is a full slate of US economic data this week, but, analysts say the markets only care about one thing: the Federal Open Market Committee (FOMC) meeting.
Currently, the Fed Funds futures contract, a proxy for market expectations of the Fed Fund rate, is pricing in a 24% chance that the central bank announcees a raises interest rates Thursday of this week.
Some economists and commodity analysts say the chances are closer to 50/50.
Some analysts noted that Gold is suffering, capping its 3rd week running in the Red, but participants refuse to price out the possibility of a rate hike.
COMEX Dec Gold futures, finished Friday’s session at 1,103.30 oz, down more than 1.7% by the end a short trading week due to the Labor Day holiday in Canada and the US.
For the 2nd week running Silver ended the week in Neutral territory. COMEX Dec Silver futures settled Friday at 14.505 oz, down less than 0.5% on the week.
With the uncertainty surrounding the Fed’s monetary policy decision this week, the near-term outlook for Gold is mixed.
This week, 195 people voted in the online Gold survey.
Among the participants, 74 people, or 38%, were Bullish, 81 voters, or 45%, were Bearish, and 34 people, or 17%, Neutral. Last week, 44% of respondents were Bullish on gold prices.
Market professionals are at odds with the retail participants, with more analysts expecting to see higher prices this week.
Out of 35 market experts contacted, 20 responded, of which 9 or 45%, said they expect to see higher prices this week, 7 or 35%, said they see lower prices, and 4, or 20%, were Neutral Gold. Market participants include bullion dealers, investment banks, futures traders and technical analysts.
Although analysts are a bit more Bullish heading into next week, their enthusiasm is tempered. Most analysts are optimistic on Gold prices and think that the precious Yellow metal could bounce North if the Fed delays its rate hike.
However gains could be limited as expectations will only be pushed back until December.
It is difficult for participants to shake off the negative sentiment overhanging the marketplace, I have to go with the current sentiment and that is for prices to head South.
That is because Gold lacks a catalyst to drive prices North.
I do not believe there will be a rate hike this September, or for the rest of Y 2015, but that will not be enough to reverse the current down trend.
You should all be aware that there are too many deflationary pressures in the global economy and the market has lost confidence in Gold.
See a retest of key support at 1,080 near-term.
Have a terrific week.
Paul Ebeling
HeffX-LTN
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