Spot gold is trading this morning near a four-week low, as more bets accumulate that the Federal Reserve will raise interest rates at their next meeting, in December. Commodities in general are lower today, on news that China’s manufacturing sector is still contracting, though at a slightly lower pace.
Gold is bouncing off major support near Friday’s low at the $1,133 level, which is also the 50% Fibonacci retracement from the 2011 high. Technical analysts note that this is also the lower limit of a bullish channel which began in late July, so there are a lot of signs showing $1.133 as a support level. Of course, with “Fed Fear” dominating the marketplace, the usual analysis could be invalidated at any time. If $1,133 breaks in a convincing fashion, $1,127 and $1,100 come into play.
Some analysts consider the drop since the hawkish FOMC meeting on Wednesday as fully pricing in a December rate hike, but others are anticipating more downside when the rate hike actually happens. A close solidly under $1,130 could switch short-term advantage to the bears, if it holds.
A slightly weaker dollar isn’t providing much assistance to commodities in general. The greenback is seeing slight pressure from a stronger euro, which is advancing after upbeat economic news out of the EU. In other currency news, the Peoples Bank of China set the yuan fix this morning .54% higher than Friday’s close, which is also weighing on the dollar.
Oil is having some special pressure in addition to the slowdown in China. Russia has announced yet another increase in oil production, which makes for another post-Soviet record and makes Russia the world’s #1 oil producer again.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.