Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”

//Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”

Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”

Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”

Gold prices in dollar terms came under renewed pressure today testing strong support at the $1,200/oz level. Gold dropped another 1% to near a 6 month low and is set for a second week of falls after the dollar soared again after Federal Reserve Chairwoman Janet Yellen suggested a U.S. interest-rate hike could come “relatively soon.”

Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” 18 12 2015 2

Source: New York Federal Reserve for Fed Funds Rate, LBMA.org.uk for Gold (PM fix)

Yellen’s prepared comments to U.S. lawmakers yesterday sent gold in dollar terms to its lowest finish since June 2, at $1,216.90 an ounce. It is worth noting that gold’s weakness this week is very much a case of gold prices in dollar terms. Gold in euros has risen from €1,130/oz to €1,137/oz and is essentially flat in sterling pound terms. Gold has risen in Swiss francs, Japanese yen and Australian dollar terms.

Yellen did little to dispel expectations of an interest-rate hike as early as December. The prospect of higher interest rates is considered by less informed market participants to be negative for gold, ignoring the fact that gold prices tend to rise when interest rates rise as was seen in the 1970s and again from June 2003 to June 2007 when interest rates rose from 1% to 5.25% and gold rose from $346 to $651 per ounce (see table above).

Gold is vulnerable when there are positive real interest rates and we are a long way from that now. Indeed, gold tends to be vulnerable towards the end of an interest rate tightening cycle – not at the beginning.

As ever, it is best to ignore both the “all powerful” Fed noise and indeed the market noise regarding rising interest rates being negative for gold. This is clearly wrong as evidenced in the data. It is also the case that the interest rate-hike expectations of just 25 basis points from record lows were already reflected in the market prior to this week.

It is prudent to ignore the incorrect narrative and consensus of gold in much of the “echo chamber” of market “experts”.  The experts and “the market” have got most big calls – such as Brexit and Trump – very wrong in recent times.

As we told Marketwatch “gold will likely need a few days to base prior to moving higher again” given “the speed and scale of the recent sell off”:

interesting-times Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” interesting times

“The election of Trump has not radically changed the positive fundamentals in the gold market – quite the opposite.

The risk of a Fed rate increase next month likely contributed to the fall and the dollar’s strength. We believe that should the Fed rise rates even 25 points, it will lead to risk aversion and falls in risk assets. This and the very uncertain state of the world – economically and geo-politically – bodes well for gold in 2017.

We are living in ‘interesting times’ and these interesting times should support gold.”

As long as central banks continue to debase their currencies by trying to inflate their way out of fragile economic growth and recessions through zero and negative interest rate policies and massive digital currency creation, gold should continue to build on the gains seen so far in 2016.

Today, interest rates remain close to zero not just in the U.S but in most major economies. There is no opportunity cost to owning the non yielding gold. Indeed, with negative interest rates in many creditor nations, gold has a higher yield then many major currencies.

Gold’s safe haven asset attributes mean that it remains a vital diversification for investors internationally today.

See 5 Key Charts Show Rising Interest Rates Good For Gold & Positives For Gold – Negative and Rising Interest Rates

Gold and Silver Bullion – News and Commentary

Gold slips on strong dollar, Fed rate hike comments (Reuters.com)

Gold set for second weekly loss on impending US rate hike (CNBC.com)

Dollar charges to 14-year high, bonds in full swing (Reuters.com)

Wall St. pulls back from record; utilities slump (Reuters.com)

Gold imports jump over 2-fold to $3.5 bn in October (MoneyControl.com)

Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” 161115 dollar yuan b 1024x576

India’s currency changes caused a gold rush last week – Washington Post (WashingtonPost.com)

Strong US dollar, a tumbling yuan – so why aren’t markets collapsing? (MoneyWeek.com)

No, inflation isn’t bad for gold – Business Insider (BusinessInsider.com)

Watching The Yuan and Gold (TFMetalsReport.com)

Operation: Shanghai Gold (UnCommonWisdomDaily.com)

7RealRisksBlogBanner Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” 7RealRisksBlogBanner

Gold Prices (LBMA AM)

18 Nov: USD 1,206.10, GBP 997.11 & EUR 1,135.54 per ounce

17 Nov: USD 1,232.00, GBP 998.81 & EUR 1,148.10 per ounce

16 Nov: USD 1,225.70, GBP 998.43 & EUR 1,144.68 per ounce

15 Nov: USD 1,228.90, GBP 998.86 & EUR 1,138.70 per ounce

14 Nov: USD 1,222.60, GBP 997.80 & EUR 1,136.53 per ounce

11 Nov: USD 1,255.65, GBP 999.19 & EUR 1,154.45 per ounce

10 Nov: USD 1,280.90, GBP 1,034.07 & EUR 1,175.48 per ounce

09 Nov: USD 1,304.55, GBP 1,050.42 & EUR 1,176.84 per ounce

Silver Prices (LBMA)

18 Nov: USD 16.51, GBP 13.30 & EUR 15.54 per ounce

17 Nov: USD 17.04, GBP 13.65 & EUR 15.87 per ounce

16 Nov: USD 16.95, GBP 13.64 & EUR 15.85 per ounce

15 Nov: USD 17.00, GBP 13.68 & EUR 15.80 per ounce

14 Nov: USD 17.20, GBP 13.73 & EUR 15.95 per ounce

11 Nov: USD 18.59, GBP 14.73 & EUR 17.09 per ounce

10 Nov: USD 18.75, GBP 15.11 & EUR 17.20 per ounce

09 Nov: USD 18.81, GBP 15.12 & EUR 16.96 per ounce

Recent Market Updates

– Islamic Gold – Vital New Dynamic In Physical Gold Market

– Peak Gold Globally – “Bullish For Gold”

– Gold Price Should Go Higher On Global Risks and Trump – Capital Economics

– President Trump – Why Market Loves Him and Experts Wrong

– ‘Helicopter Money President’ Trump To Create Inflation and Gold Will Rise

– Central Bank Gold Demand continues in Q3

– Trump Victory Sends Gold Surging 5%

– An uncertain election outcome looks good for gold

– Ignore past elections, this one’s too uncertain

– Gold may be the only winner in US elections

– The London Gold Market – ripe for take-over by China?

– Diwali, Gold and India – Is Love Affair Over?

– Silver Krugerrands By South African Mint Coming Soon – Massive Clearance Sale on Gold Krugerrands

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Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold” Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”   ptq

By | 2016-12-23T20:17:08+00:00 November 18th, 2016|Blog|0 Comments

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