Gold Price Steady Ahead of Fed

March 14th, 2016 by

Gold-BarsThe gold price recovered its poise, so to speak, following a modest drop to close out trading on Friday last week. The markets will keep a close eye on central bank activities this week as several of the world’s monetary policymakers, including the Federal Reserve, will be holding meetings in the coming days.

Spot gold was about 0.6% higher at the beginning of the session on Monday morning, trading near $1,258/oz. The price subsequently fell 0.2% into negative territory around 9:45 am ET, settling at $1,250/oz.

Silver prices were stronger, rising 0.5% (+10¢) to $15.65/oz. Meanwhile, the platinum spot price clawed a bit higher to $970/oz after hitting a wall at the key $1,000/oz level earlier in March.

Stocks in the U.S. pointed lower the begin the day, continuing the patter of following oil prices. Both Brent and WTI crude were trading about 2.5% lower on Monday morning, tumbling back below $40/bbl.

Exercising Caution

Gold fell victim to profit-taking last week, posting its steepest single-day trading losses in a month. However, the lower prices have helped spur more bargain-hunting and as the markets continue to be wary—with good reason!—of how central banks are handling the global economy.

Federal Reserve Open Market Committee (FOMC)

Federal Reserve Open Market Committee (FOMC)

With its close connection to monetary policy, this ought to be a fairly active week as far as trading of the yellow metal is concerned. In addition to the Federal Reserve Open Market Committee (FOMC) meeting being held on Tuesday and Wednesday, we will also see the Bank of Japan (BOJ), the Bank of England (BOE), the Swiss National Bank (SNB), and several other monetary authorities hold policy meetings this week. The BOJ is holding formal discussions today and tomorrow, though no major changes are anticipated. Any surprise decisions by any one of these central banks could deal a blow to already-shaky market confidence, providing an even bigger lift to gold prices.

Until these decisions come to light later in the week, expect market participants to remain cautious in the moves they make. In this vacuum, global equities are performing well on Monday, with nearly every index around the world trading modestly in the green. The dollar also rose slightly, gaining a quarter-percent against its peers to register at 96.4 on the DXY index.

Rebounds Abound

happy-businessman-celebrateEven if policymakers around the world choose to do nothing of note at this week’s central bank meetings, buying momentum remains positive for gold. According to the Commodity Futures Trading Commission (CFTC), bullish bets on gold futures are at a 13-month high. These bets on rising gold prices were led mostly by the big guns—hedge funds and money managers. It’s usually a good sign when even the managed money is piling into gold.

This marked the eighth week out of the last nine that net long positions on gold have risen. According to Commerzbank (based in Frankfurt, Germany), the surge in long positions on gold futures represent the equivalent of 481 tonnes of the yellow metal being purchased. Several analysts expect to see gold prices in the $1,275/oz range over the upcoming week.

It’s not just the precious metals that are bouncing back, either. With the widespread use of negative interest rates across Europe stoking anxieties, European bank stocks fell to a 3-and-½-year low last month. The drastic moves taken by the European Central Bank (ECB) last week seem to have done their trick in (though only in the short-run), lifting bank shares in Europe almost as quickly as they fell.

 

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.