Today’s Spotlight Market
Gold futures are little changed this morning after suffering late decline in yesterday’s trading. The policy statement from the FOMC could be seen as extremely dovish on the surface, reiterating that interest rates are going to stay at near zero for a “considerable time”. The central bank also moved forward with further reductions to asset purchases, staying on pace to end quantitative easing next month. The Fed had indicated that the labor market will heavily influence the bank’s interest policy moving forward. The soft August jobs report likely influenced the FOMC to include the “considerable time” language in the policy statement. Despite the language in the statement, it seems that the bank is preparing the market for higher interest rates, which can be seen as Gold bearish. Tying the interest rate policy to the labor market potentially gives the Fed justification for deviating from its low interest policy if labor conditions improve.
Fundamentals
Gold fundamentals remain negative, despite what could be viewed as a potentially bullish FOMC policy statement. Holdings in gold-based ETFs are at the lowest level since October 2009, reducing demand from investors. The recent strength of the US Dollar has also exerted a negative influence on the Guild market.? The greenback has the potential to keep moving higher, given the economic situations in Japan and Europe are far from ideal, which could lead to further injections of liquidity by their respective central banks.? Commodity driven currencies, like the Aussie, Kiwi and Canadian Dollars have been hurt by weaker commodity prices.? The relatively cheap price of Gold could attract some value buying around these levels.
Technical NotesView Today’s Chart
Turning to the chart, we see the December Gold contract trading below support at the 1240.50 mark.? The next significant support levels can be found at 1185 and 1075.? The RSI is currently at oversold levels, which could be seen as supportive of prices in the near-term.
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