Fed Brings Little Joy For Gold Traders
Today’s Spotlight Market
Gold futures briefly traded at a one week high before doing an about fact after the release of the Federal Reserve policy statement. The central bank decided to keep interest rates unchanged, surprising no one. However, the FOMC?s general tone was far more hawkish than many traders were expecting, stating the bank would focus on whether or not to raise rates in its mid-December meeting. This sent the Dollar Index to its highest level since early August and pressuring Gold prices.
Fundamentals
Yesterday?s Federal Reserve policy statement came as somewhat of a shock for traders. Prior to the meeting, Fed Funds futures had only priced in roughly a 30% chance of a Fed rate in the December meeting. However, this shifted to roughly a 50/50 chance after the statement was released. This could set a much more bullish tone for the US Dollar going forward, which may put pressure on commodity prices, namely precious metals. The third quarter has been strong from a demand standpoint. India, China and Germany accounted for about 26 tonnes of additional retail Gold buying in the third quarter. The three countries buying increased by 30%, 26% and 19%, respectively and accounted for an additional 26 tonnes of retail buying. This does not even count Russia, who is expected to be the largest official buyer of Gold this year. Global Gold coin demand rose 110% quarter over quarter and 139% year over year. Coin sales were 48 tonnes in Q3, the highest level since Q2 2010.
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