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Comex Gold Eases Slightly After FOMC Statement, Then Stabilizes

By Allen Sykora Kitco News
Wednesday September 17, 2014 3:06 PM

(Kitco News) - Gold futures eased modestly but quickly stabilized Wednesday after a policy statement and forecasts from the Federal Open Market Committee that retained the “considerable time” language for when interest rates might rise but nevertheless was seen as ever so slightly setting markets up for eventual increases.

Around 2:53 p.m. EDT, gold for December delivery was down $3.90 to $1,232.80 an ounce on the Comex division of the New York Mercantile Exchange. The market finished the pit session at $1,235.90, which closed a half hour ahead of the FOMC statement.

December silver fell 7.1 cents to $18.65. The metal settled at $18.734 after the pit session.

The central bank left interest rates unchanged and continued to whittle down its bond-buying program, often referred to as quantitative easing, by another $10 billion a month, as was expected.

Much of the focus going into the meeting was on whether policy-makers would retain language saying the federal funds rate would remain low for a “considerable time” after QE ends. Some economists had thought the Fed might remove this phrase, although these ideas were cooled when Wall Street Journal Jon Hilsenrath suggested Tuesday that the Fed might keep this language, not wanting to scare markets into thinking a rise in rates is imminent.

“They slightly – and I repeat the word ‘slightly’ – upgraded the economy but they did express continued concerns….,” said Bill O’Neill, one of the principals with LOGIC Advisers. “I think one of the things gold traders reacted to were the two dissenters – (Charles) Plosser and (Richard) Fisher.”

At the last Fed meeting, the only dissenter to the Fed statement was Plosser.

“To me, this is part of the Fed’s show…which is to gradually prepare the market for a soft landing on rates,” O’Neill said. “I think overall perhaps the (statement) was slightly less hawkish than the consensus had anticipated, but they did move in that direction….I think they moved the needle slightly ahead toward eventual tightening.”

The U.S. dollar rose after the statement. The euro fell to $1.29306 from $1.29572 late Tuesday.

“The dollar spiked a bit,” said Frank Lesh, broker and futures analyst with FuturePath Trading. “Overall, that remains a problem for gold. We’re a little closer to rates going higher-- not that we know exactly when.”

December gold quickly dipped to a low for the day of $1,228.20 after the Fed statement but avoided follow-through selling. The market held just above Monday’s eight-month low of $1,226.30 an ounce.

“We have gold as ‘oversold,’ and we’ve got (chart) support down here,” said Lesh on what enabled the metal to stabilize “We still have some geopolitical concerns out there. They provide some support for the gold market and will continue.”

O’Neill said he looks for gold to “quickly settle down” after the initial movement after the FOMC. Still, he said, “you have to look at what the long-term trend will be here,” which is that eventually interest rates are likely to move higher, “although quite gradually.”

After Monday’s low around $1,226, Lesh put the next chart support for December gold at $1,214, then $1,185. He pegged resistance at $1,252, $1,263 and $1,280.

The London afternoon gold fixing – which occurred well ahead of the FOMC outcome -- was $1,236 an ounce. This compared to the a.m. gold fixing of $1,236.50 and the Tuesday afternoon fixing of $1,232.25.

Earlier in the day, the gold market showed little reaction to early-morning U.S. economic data as traders awaited the Fed. However, some economists noted that the tame consumer price index could take some of the pressure off of policymakers to move ahead tightening. Consumer prices fell 0.2% last month. Excluding food and energy, CPI was unchanged.

By Allen Sykora of Kitco News; asykora@kitco.com

 

 

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 precious metal products, 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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