by Umar Farooq
Global gold prices inched up on Wednesday as the market waited for direction from the outcome of a two-day US Federal Reserve meeting, with the central bank expected to hike interest rates and give indications on its monetary policy for the rest of the year.
“Gold prices fell to new multi-week lows against all major currencies Thursday morning, dropping to $1254 per ounce for Dollar investors as all other tradable asset classes also fell following the Federal Reserve’s decision to raise US interest rates despite weakening economic data. The Fed also said it plans to start “normalizing” its balance sheet – swollen to $4.4 trillion by QE money creation and bond buying – sometime in 2017, giving a possible date to stop re-investing cash from maturing assets for the first time.” Bullionvault
“Gold may have been frustrated in its most recent run at $1,300 an ounce but geopolitical risks could catapult it above that level over the next 12 months. That’s the view of ANZ’s senior commodity strategist Daniel Hynes, who reckons gold can hold above $1,250 an ounce despite the threat of higher U.S. interest rates. Here’s Hynes in his own words: We see gold holding above USD1, 250/oz in the short term. Safe-haven buying has supported gold prices over the past six months, and rising geopolitical risks – particularly in the US – are likely to propel prices even higher. If the US political situation worsens this year, there is an increasing possibility of prices breaking through USD1, 300/oz. We think the environment is conducive to higher gold prices, despite the spectre of a US rate hikes in June and September. Much debate has taken place over the impact of rising US interest rates on gold, but we don’t see it as a negative. Gold has pushed higher in all but one of the past seven rate-hike cycles since the 1970s. It has also outperformed in the cycles where interest rates were increasing relatively slowly. Even without the support of safe-haven buying, we anticipate a strong environment over the next 12 months. We are also observing signs of an improving physical market. Demand in India and China have in recent months rebounded sharply from a low base. Issues around demonetization in India are abating, while sharp pick-up in China’s gold imports suggest previous constraints have also eased”. Barrons
Sam Laughlin, a senior precious metals trader at MKS, said in a note that “Generally light positioning and numerous upcoming geopolitical events should continue to underpin demand for the metal,” He added that targets for the metal were now “extending to the 2017 high around $1,295 and the psychological level of $1,300 above this”. Theweek
by Umar Farooq