Gold prices appear to have found a base either side of the $1,250 per ounce, basis spot, with prices now getting some lift and silver prices are well placed to challenge recent resistance $17.78 per ounce.
On Friday, 21st October, San Francisco Fed President John Williams said at a mortgage conference that “it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.” His comments followed recent hawkish talk from central bank officials including New York Fed Chief William Dudley and Fed’s vice chair Stanley Fischer, which prompted investors to price in an interest rate increase this year.
The main concern currently is the conflicting scenario between Fed officials like Fischer and Dudley who have been signalling a rate hike before the end of the year, while the ECB has arguably signalled a likely extension of its asset purchases.
The ECB kept interest rates at historic lows last Thursday, and its President Mario Draghi kept the door open for more stimuli, effectively quashing any speculation that the bank was poised to taper its 1.7 trillion euro asset-buying programme.
Being only a few days before the U.S. presidential election, many analysts are not expecting the Federal Reserve to take any concrete steps.
However, expectations for a December move jump to 75%, the highest it has been all year as we see all the action happening in December.
As we head into what has seasonally been the best time of year for the sector, here are a few possible major data release that could influenced gold prices during coming months.
November 4th: The Non-farm Payrolls Report (NFP) for October will be released on this date. The gold sector usually sells off into this report and becomes very volatile after the release as trades are set beforehand based on the expected number of jobs created. This is a highly anticipated report as the results will be heavily factored into the Fed’s decision process of whether or not to raise interest rates in December. The market is factoring in a 70% chance of a quarter point raise on December 14th as of this post.
November 8th: The US election could very well be a major promoter as during the last Presidential Debate, Donald Trump made accusations of the election possibly being rigged against him. He has also stated if defeated, he will not commit to accepting the outcome, stating “I will tell you at the time”. This is a very dangerous statement and could easily trigger violence after the outcome. Also, if victorious, the decision could very well cause a “Brexit” type response in the gold sector as Trump is the anti-establishment candidate.
December 2nd: The release of the final NFP report before the highly anticipated last Federal Reserve Open Market Committee (FOMC) meeting of the year will be released . This could possibly be the deciding factor on whether or not Fed chairwoman Janet Yellen decides to raise rates this year.
December 14th: On this date the market will finally find out the answer to the question of, “will she, or won’t she”. If the Fed decides to raise rates at the conclusion of the December 13-14 FOMC meeting, the gold sector could initially sell off as it did last December. This could be a buying opportunity as rising rates have historically been bullish for gold as we saw back in the late 1970’s when former Fed chair Paul Volcker raised rates to over 20%. During this time gold had the largest bull market in history as it soared from $105 in September, 1976 to $850 in January, 1980. Also, in December of last year after 7 years of zero rates, the Fed finally decided to raise rates a quarter point.
There are a lot of major U.S. reports coming and if the data is positive then there is no reason why the U.S. dollar can’t go higher and that could hurt gold. So as the world waits the month of December for its Christmas Celebration, the financial markets await the same month as a lot of action is bound to take place.