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
