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Gold Continues to Price in a Fed’s Tapering in September

The U.S. Comex gold futures were unchanged on Monday but fell 1.64 percent on Tuesday. The gold futures have fallen 2.30 percent this month and 18.62 percent this year. The CRB Commodities Index fell 1.11 percent and the crude oil futures plunged 2.84 percent during the past two days as the prospects of a diplomatic solution to the Syrian problem have risen. The S&P 500 Index rose 1.74 percent this week after rising 1.36 percent last week while the Euro Stoxx 50 Index jumped 1.71 percent after surging 3.02 percent last week. The Dollar Index fell 0.40 percent this week to end at 81.821 on Tuesday while the U.S. 10-year government bond yield settled at 2.9681 percent after breaching 3 percent during Asian trading on 6 September.

Looking to Fed’s Tapering and Chinese Growth Rebound
The gold futures rebounded about one percent last Friday when the U.S. reported that 169,000 non-farm payrolls were added, which was lower than expected, and the unemployment rate fell to 7.3 percent in August. Barclays believes this still warrants the Fed to start reducing asset purchases in the September FOMC meeting from $85 billion a month currently to $70 billion, with a halt to asset purchases in early 2014. In China, macro data continue to point towards stabilization and improvement. The August industrial production rose 10.4 percent year-on-year compared to the expected 9.9 percent. Exports and imports rose 7.2 percent and 7.0 percent year-on-year in August compared to 5.1 percent and 10.9 percent in July. The Chinese leaders state that a slower growth is a deliberate policy as the economy goes through structural changes and a 7.5 percent growth target appears likely. The Chinese growth rebound is bullish for gold prices as well as commodities in general.

Shorter-term Factors at Play
The imminent threat of a Syrian war has receded as the U.S. senators are evaluating the Russian proposal to Syria to remove its chemical weapons. Investors have resumed selling their gold-backed ETFs in September after the stabilization in late August. Gold speculators have increased their combined net positions four weeks in a row to 101,396 contracts according to the CFTC. The Comex gold inventories have plunged 36 percent this year when physical demand for gold and physical delivery have increased in response to the plummeting prices in April and June. Nevertheless, the upcoming FOMC meeting and the U.S. economic data remain the larger factors on the direction of gold prices.

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11 Sep 2013 | Categories: Gold

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