Gold Steady, Pressured by Fed

November 4th, 2015 by

Fed Chair Janet Yellen

Fed Chair Janet Yellen

Wednesday morning finds gold steady near yesterday’s low. Spot gold closed down $16 on Tuesday, while West Texas Intermediate gained 3.8% (a bullish outside factor for gold.) All markets are awaiting clues on the timing of a rate hike by the Federal Reserve, with the Fed’s top three officials are scheduled to speak today. Chairman Janet Yellen will testify before the House Financial Services Committee this morning, followed by New York Fed president William Dudley this afternoon, and Vice Chairman Stanley Fischer this evening.

Increasing consensus of a rate hike occurring in December is keeping the dollar strong, which is a bearish factor for all commodities.

payrolls upThe ADP private payroll report, which does not count government jobs, showed a gain of 182,000 for October. This was in line with expectations of 180,000. September’s report was adjusted downward by a hair to 190,000 from 200,000. Friday’s Non-Farm Payroll report by the government will be the most important report all month, since it will be a major factor in the Fed’s decision to raise interest rates or not.

 

The nation’s trade deficit shrank in October by 15% ($7.2 billion) to $40.8 billion. This was due to the plunging value of oil imports, which were an an 11-year low. Large crude stockpiles in the U.S. are contributing to lower oil imports.

balance of gold and dollarShort covering and bargain hunting is keeping gold steady ahead of today’s speeches by the Fed. News of a fall in wholesale prices in Europe has increased pressure on the European Central Bank to increase its quantitative easing program. This is weakening the euro and strengthening the dollar, which is bearish for gold.

Expect volatility across all markets due to Fed testimony today, especially if analysts (or their computer algorithms) detect any divergence in statements between the different officials.

 

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.