Gold has now fallen over $50.00 from the recent highs after briefly trading above $1,280.00. The market has been pressured by short term traders who have taken profits and liquidated long positions along with producers who have taken advantage of the rally and have been hedging. In addition, there has been the reemergence of short sellers who are encouraged by higher bond yields, a generally stronger USD and news of a sharp fall in gold demand in India and China. While physical demand remains good in the U.S. and elsewhere and investment in the ETF’s has at times been robust in 2016 gold appears to be at a cross road and I am looking for a $100.00 move from the current price of $1,230.00 sooner than later. With that being said, I will not predict which way it goes but I will say gold falls to $1,130.00 or moves up to $1,330.00 in the coming weeks.
As we await the statement from Chair Yellen later today following the FOMC meeting, our market is trading quietly on very light volume with all four precious metals trading slightly above yesterday’s settlement prices. I do not expect any policy changes from the FOMC today but the tone and content of Chair Yellen’s statement could bring fireworks to all markets. Any reference to inflation remaining very low and concern about domestic and global growth would indicate a rate hike is likely not on the agenda and no more than two rate hikes the second half of 2016 are likely to occur. This scenario would certainly support precious metals. The flip side would be comments about inflation is picking up (which is what the FOMC wants to see) and the uncertainly about economic growth is now behind us as witnessed by the rebound in global stock markets. This scenario will certainly pressure precious metals and set the stage for a possible rate hike as early as next month when the FOMC meets on April 26 & 27.
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