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Saturday, November 18th, 2017

IGI Securities Limited – Commodity News

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by September 22, 2016 Brokerage

Karachi, September 22, 2016 (PPI-OT): Gold

Technical

Gold prices moved lower then higher as the dollar whipsawed, in the aftermath of the Fed announcement, which left rates unchanged, as largely expected. The statement said the case for a rate hike has strengthened, with one hike seem by year end. The FOMC forecast revisions released in conjunction with the FOMC statement revealed the expected small downward tweaks in the official 2016 estimates for GDP and PCE chain prices Gold sliced through former resistance now support near the 10-day moving average at 1,322. Resistance is seen near the September highs at 1,350. Momentum is neutral as the MACD (moving average convergence divergence) index prints in the red with a flat trajectory which points to consolidation. The RSI moved higher with price action reflecting accelerating positive momentum, which points to higher prices for the yellow metal.

Highlights

Gold prices hit their highest level in 12 days after the Fed held interest rates

Spot gold prices hit a two-week high of $1,336.8 an ounce after the Fed said that it would keep rates steady

Higher interest rates will dampen gold prices as the gold doesn’t offer a yield

A rise in interest rates will also boost the dollar, making it more expensive for investors outside the U.S

Fed Chairwoman Janet Yellen stated that the fed remains data dependent

Fundamentals

Gold prices fell today as investors booked profits after a more than 1.5 percent rise in the previous session, opting for riskier assets like equities as the U.S. Federal Reserve stood pat on interest rates.

The U.S. central bank, however, strongly signalled it could still tighten monetary policy by year-end as the labour market improved further. Spot gold was down 0.3 percent at $1,332.70 an ounce, while U.S. gold futures rose 0.4 percent to $1,337.30 an ounce.

People are expecting that the Fed is going to raise rates for sure in December. So, they have started to take profits. The first phase of a gold run, which is largely driven by the Fed’s inaction to raise rates, is over. The market is now looking three months ahead and taking positions accordingly.

Still, spot gold may retest a key resistance at $1,338 per ounce, as suggested by its wave pattern and Fibonacci projection analysis, according to Reuters analyst Wang Tao.

The rate environment looks less accommodative even it remains on a more gradual slope, meaning that oversized rallies in the yellow metal may not have much room to run. The ongoing strength in equities could also hurt gold’s prospects.

Asian shares surged today, taking their cue from Wall Street, slugging the dollar and lifting most commodity prices. Indications out of the Federal Reserve that a 2016 rate increase is still very much a live possibility may restrict gains to gold above $1,340,

Initial support for the metal sits toward $1,330, while resistance toward $1,340 is keeping a lid on any moves higher. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.60 percent to 944.39 tonnes on Wednesday.

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