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Growing Doubt Over Aggressive Fed Action Neutralizes Gold Bears

Commentaries & Views

Session close: Settled at 1248.6 but traded more than $10 higher after Fed announcement

Fundamentals: Gold ha performed very well since the Fed hiked interest rates yesterday. Yes, you read that statement correctly; Gold has performed very well since the Fed hiked interest rates yesterday. This is because the rate was priced in and Gold longs have already been tormented enough over the last two weeks, they were ready to reposition. Ultimately though, as we have been hammering home, we believe the Federal Reserve, during this hiking cycle, will never be as hawkish as they were one year ago. To add to the bull case for Gold, there were two dissenters yesterday for the first time this year (voting ‘No’ on the hike; Kashkari and Evans). The Fed Dot Plot (click here to view) still prices in three hikes next year but there is without doubt more doubt over those three hikes then there has been and that means the Dollar is ‘dovening’ up. Tax-reform should be materially priced in by now, but still remains a hurdle for Gold as it could give the Dollar its last stand before yearend. But we remain firm that we like buying Gold ahead of the New Year with the expectations of a positive performance in January. The ECB is still yet to come. ECB President Mario Draghi holds a press conference at 7:30 and currencies will be key for the Gold trade. Retail Sales is due at 7:30 am CT, a key number ahead of the holiday season. Manufacturing and Services PMI’s are due at 8:45.

Technicals: Yesterday’s recovery surely neutralized the tape at minimum. We don’t necessarily advise chasing this price action in a FOMO manner. However, we see support at 1247-1250 and this area, if retested should prove to be a solid buy opportunity over the next 45 days. Call our trade desk at 312-278-0500 and we would be happy to discuss strategies on both options and futures to take advantage of our expectations.

Bias: Bullish/Neutral

Resistance – 1262.8-1263.2**, 1273.9-1276.8***, 1289**, 1303.4-1304.7****

Support – 1247-1250**, 1237-1241.7**, 1214.5-1225***

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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