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Gold Price 'Under Pressure' Before Fed Minutes, 2016 Uptrend 'Over'

Wednesday, October 12, 2016 6:51
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Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…

GOLD PRICE losses of 0.5% for the week were reversed Wednesday lunc htime in London, with the metal rallying in a tight range as world stock markets extended yesterday’s 1.2% loss in New York.
Silver also rallied from a drop to 3-session lows as the gold price bounced to $1255 per ounce, but the white metal struggled to regain $17.50 per ounce.
Government bond prices also slipped, as did commodities, with minutes due out later on Wednesday from the US Federal Reserve’s September policy meeting, when the Fed voted 7-3 to hold rates at a ceiling of 0.5% for the ninth month running after finally raising from zero after 7 years in December 2015.
Dissenting voter Esther George, president of the Kansas Fed, was due to give a speech as New York markets opened.
“We don’t conduct monetary policy with any eye to political outcomes,” said New York Fed president and voting member William Dudley when asked about November’s presidential election this morning.
US Fed member Lael Brainard “is being spoken of as…Treasury secretary in a Hillary Clinton administration” reports the Financial Times.
“Very dull markets in precious at the moment,” says David Govett at brokers Marex Spectron in London, “[but] I suspect that the [Fed] minutes will just reinforce the probability of a December rise.
“We may see some [further] pressure on the precious complex later.”
“This year’s uptrend is over,” says a note from Dutch bank ABN Amro’s precious metals and FX analyst Georgette Boele, pointing to gold’s failure to hold its 200-day moving average and cutting her end-2016 gold price forecast by almost 10% to $1200 per ounce with a further fall to $1150 now forecast for 2017.
“We have revised downwards our gold price forecast because we think that investors will continue to liquidate.”
Gold bullion holdings for exchange-traded trust funds – an increasingly favored vehicle for fund managers so far this year – held steady Wednesday, with the giant SPDR Gold Trust (NYSEArca:GLD) retaining October’s 1.2% growth to date against the gold price’s 5% fall.
Shanghai trading volumes eased further overnight, with the premium in China – the world’s No.1 miner, importer, consumer and central-bank buyer – falling to $3.35 per ounce over London quotes at the city’s afternoon benchmark fix.
One third above the Shanghai Fix’s historical average incentive to importers, that was the lowest since late September, before last week’s long National Day vacation.
Chinese bullion and jewelry shops have “slashed” gold prices since the end of Golden Week, the China Daily reported on Tuesday, reflecting both the $50 per ounce drop in world prices from before the holidays but also to counter how “people are less interested in purchasing gold bullion as an investment product,” according to one Beijing retailer.
Gold imports to India – the former No.1 consumer, with zero domestic mine output – meantime sank almost 60% year-to-date compared with January-September 2015 says chambers of commerce group Assocham.
“Going forward, the festive demand [due with Diwali at end-October] will get a further push from the wedding season…the main contributor to gold consumption in India,” says Assocham in a new paper.

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


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