Gold barely hangs on as Fed chatter increases
James Chen, CMT October 13, 2016 8:52 PM
Wednesday’s minutes from September’s FOMC meeting showed that an unusually divided Fed still had concerns about jobs and inflation, but that it looks to be getting much closer to raising rates, especially in light of the fact that several key Fed members warned that further delays in raising rates could be risky, potentially leading the economy into recession.
While current and near-future risk conditions – US presidential elections, company earnings season, and crude oil prices, to name a few – could give gold a temporary boost, as the precious metal has typically been considered a safe haven asset, the specter of a Fed rate hike cycle is likely to overshadow or correct any such upside move for gold prices.
As chatter and speculation regarding the Fed’s intents have increased recently, gold has been plunging for the past two weeks. The latest culmination of this plunge has seen the price of gold settle just above major support around the $1250 level. Thursday’s initial drop in the equity markets helped boost gold modestly, but the effect was short-lived, as rebounding crude oil prices helped stock markets bounce back. Still in consolidation just above $1250 support, gold is at a critical juncture. With expectations of Fed action on the rise, gold could potentially have significantly further to fall. Any major breakdown below $1250 could follow-through towards the next key downside target at the $1200 psychological support level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.