Spot gold held ground early this morning, just 0.12% lower at $1,069/oz in choppy trading. As gold prices seem to stabilize after about a month of successive swings higher and lower, most analysts are convinced that rate hike considerations are fully priced into the precious metals market.
The other metals were also mostly flat at the open. By 9:30 am ET, however, each of the metals popped modestly into the green.
Giving Back Gains
On Monday, each of the precious metals slumped sharply, giving away more than half of their two-day rally to end last week. Some of the losses were also attributable to a brief rebound for the dollar. On Tuesday morning, the USD was down just 0.2% on the DXY to 98.5.
Global stocks were also considerably lower on Tuesday, with red numbers across the board. Equities indices overseas were all down between 1% and 2% before markets opened in New York. By the time Wall St kicked into gear, U.S. indices were each 1% lower. Crude oil prices tried to claw back from hitting 7-year lows. Both benchmarks were below $40 per barrel on Tuesday morning.
Outlook for Gold
Some of the weakness in energy prices has been spilling over to commodities in general, and this includes the precious metals. Yet, as the only commodity with unique monetary properties, gold has been supported on the opposite end by missteps in the foreign exchange market. Forex traders sold out of the USD after the euro rallied following last week's tepid QE announcement by the European Central Bank (ECB), which caught many of them off-guard. The weaker dollar has helped lift the precious metals, especially with thin volumes.
Tuesday action moves gold's support to the $1,069/oz mark, with the next key resistance levels at $1,080 and $1,088.
Much of this volatility in the financial markets over what central banks are doing (particularly the Fed, of course) would seem to be winding down. The commodities expert at Capital Economics sees that "investors are already factoring in a rate increase by the Fed," so subsequent movement in the markets this year are likely to be due to other reasons.
Meanwhile, Commerzbank noted that physical gold demand continues to climb in China. The country's central bank added another 21 tonnes of gold to its reserve assets, the biggest monthly addition since the People's Bank of China began publishing official numbers for the first time earlier this year. With the expectation that bullion buying in Asia will remain strong through 2016, coupled with very shallow and gradual rate hikes from the Fed, Commerzbank also projects that the gold price will finish next year at $1,200/oz while silver will end 2016 at $17/oz. It does, however, qualify that it sees metals prices bottoming during the first quarter of 2016, with the majority of the rally occurring during the second half of the year.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.