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KITCO CURRENCY CHARTS: Gold Loses Ground In Most Currency Terms Post-FOMC, Except Euro

In the wake of Wednesday's hawkish Federal Open Market Committee statement, gold prices in dollar terms continue to suffer as the U.S. dollar index rises. Based on Kitco's Gold-Currency Charts, spot gold has lost ground not only in dollar terms (-0.99%), but also in Swiss francs (-0.11%), the Canadian dollar (-1.40%), the British pound (-0.64%) and the Japanese yen (-0.29%). However, the metal managed to see gains of roughly 0.19% in euro terms post-FOMC. The central bank has left rates unchanged, with a potential hike in December still in the cards. The marketplace deemed the statement as hawkish and gold prices have been falling on the news. The U.S. dollar index was last quoted up 0.80% at $97.69.

By Sarah Benali of Kitco News; sbenali@kitco.com

 

Fed Leaves Rates Unchanged, Gold Suffers – RBC's Gero

Wednesday October 28, 2015 14:22

As the Federal Open Market Committee meeting concluded Wednesday, one precious metals market veteran says gold's inability to breach the $1,200 level has disappointed traders. George Gero, precious-metals strategist for RBC Capital Markets, says the gold market is seeing "selling on the news as again the Fed sets up next month as a possible rate hike looms ahead with a dollar index rising as well." The statement downgraded the central bank's levels of concern for global and economic issues, however, it has been deemed by market participants as favoring the hawks. Spot gold was last quoted down $3.80 at $1,163.20 an ounce. The U.S dollar index was last up 0.28% at $97.18.

By Sarah Benali of Kitco News; sbenali@kitco.com

 

More Aggressive Tightening From Fed In 2016 Than Markets Have Priced In - Capital Economics

Wednesday October 28, 2015 12:43

As markets await Wednesday’s Federal Open Market Committee meeting to conclude, one UK-based research firm says that despite it being a non-event, the central bank may look to make more aggressive policy moves moving forward. “[W]e continue to expect US interest rates to be raised more than the markets anticipate in 2016 and beyond,” says Julian Jessop, chief global economist for Capital Economics, in a research note Wednesday. “Nonetheless, this prospect should not be as alarming as it sounds, both because it depends on global economic and market conditions improving, and because policy elsewhere is still likely to be loosened further,” he adds. According to Jessop, the Fed will hold off on raising rates until March of next year, prompted by weaker employment data and a ‘likely’ slowdown in Q3 GDP data. “Beyond that, however, rising inflation will prompt a more aggressive tightening than markets currently have priced in.” Jessop explains that they expect the Fed funds rate to increase no more than 2% in 2016 and 3 ½ % in 2017. “What’s more, these forecasts depend on the US economy remaining strong enough for wage and price pressures to pick up, and on there not being any major adverse reaction in the markets. If these conditions are not met, the Fed would surely go back on hold (or even reverse course),” he says. Looking at the global picture, Jessop says he expects more easing from the European Central Bank, the Bank of Japan and the People’s Bank of China; adding that emerging markets shouldn’t be too concerned with Fed rate hikes. “We are also relatively relaxed about the impact of Fed tightening on emerging market (EM) equities and on commodity prices,” he said, noting that both might actually benefit after the first rate hike is in place as markets will perceive it as a vote of confidence in the global economy. “In any event, the prospects for most EMs depend far more on developments in China than on whether US interest rates end next year at zero, or (a still-low) 2%.”

By Sarah Benali of Kitco News; sbenali@kitco.com

 

Silver Bulls Fighting Hard Ahead of FOMC– iiTrader

Wednesday October 28, 2015 11:24

The silver bulls are trying to put on the rocket boosters and take the market to new highs and breakout territory say analysts over at Chicago-based iiTrader.com  “It has been a very quiet start to the week, however that all changes ahead of today’s FOMC meeting,” they write in their  Wednesday notes.  The trading firm notes that Wednesday’s  morning rally has come on relatively light volume and it anticipates the bulls will find a tough battle against the old October highs. “Any rallies will be hard to validate until the bulls can get a convincing close above 16.36***.  The CoT structure remains stretched out and, although going we’re against the grain, we like taking a shot to the short side and selling into 16.36 with a fairly tight risk leash,” they write.  “It’s next to impossible to imagine the FOMC statement releasing any groundbreaking changes however it will certainly provide the markets with an excuse to move.  Whether it’s rational or not,” iiTrader adds.    

By Daniela Cambone of Kitco News; dcambone@kitco.com

 

Fed is On Hold; Rightfully So – Dennis Gartman

Wednesday October 28, 2015 10:18

The Fed is on veritable hold, and well it should be at this point says famed economist Dennis Gartman, ahead of today’s Federal Open Market Committee.  “[W]e fully expect today’s communique to be lifted nearly whole clothe from the communique released after the previous meeting, and we are prepared to suggest that the post-meeting communique that shall be released after the December meeting shall look very much the same,” he writes in his Wednesday Gartman Letter. “We do expect to read in the communique about the strength of the US dollar as having had a very real deflationary effect upon the economy here in the States, and perhaps we may even read about the dollar’s effect upon corporate earnings. But the Fed has made it clear that it is indeed “data dependent” and it is aware of the confusion the various and divergent comments from its members may have caused and will go out of its way to clarify that situation,” Gartman explains. But when push has come to “ratelifting” shove nothing shall be done, Gartman says. He adds that “lift off” will not happen until after the turn of the year, unless as Gartman says, “ something truly astoundingly positive were to happen to the economy in the course of the next two months.”

By Daniela Cambone of Kitco News; dcambone@kitco.com

 

Commerzbank, HSBC: Chinese Gold Imports From Hong Kong Confirm Strong Demand

Wednesday October 28, 2015 08:43

September gold imports into China from Hong Kong confirm strong demand in the key gold-consuming nation, say HSBC and Commerzbank. According to news reports, China’s net gold imports from Hong Kong climbed to 97.242 tonnes in September from 59.319 tonnes in the prior month. This was the highest monthly level since November 2014. “Since the start of the year, China has now imported 582 tonnes of gold from Hong Kong on a net basis, which is just shy of 3% more than in the same period last year,” Commerzbank says. “In other words, imports have now caught up following a subdued start to the year; gold imports in the first half of the year were nearly 20% down on the previous year.” Increased Swiss gold exports to China and Hong Kong and record-high gold withdrawals on the Shanghai Gold Exchange had already indicated “robust” Chinese gold imports, Commerzbank says. Adds HSBC:  “Brisk demand from China is central to sustaining prices, as after a strong August, Indian demand for imported gold seems to have cooled.”

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

 

BBH: Fed Data Dependent; ‘Onus On The December Meeting’

Wednesday October 28, 2015 07:56

The U.S. Federal Open Market Committee is data dependent and the December meeting is likely to be more important than the one that winds up Wednesday, says Brown Brothers Harriman. “No one expects the Federal Reserve to change policy today,” BBH says. “Those who expect a move this year are focused on the mid-December meeting. The overall assessment of the U.S. economy is unlikely to have changed significantly since the September meeting.” In particular, market participants will be watching Wednesday to see how the Fed characterizes the labor market after two soft nonfarm payroll reports. “However, other readings on the labor market do not confirm the deterioration,” BBH says. “Specifically, the ADP estimate showed no marked slowdown in (private-sector) employment and the weekly initial jobless claims -- four-week average – (are) at new cyclical lows.” Previously, the Fed’s leadership suggested that it still anticipates a rate hike before year-end, provided there are no new negative surprises and the economy evolves as expected. “As there are two meetings left including today's meeting, it puts the onus on the December meeting,” BBH says. With no press conference Wednesday, the FOMC statement takes on greater importance and will scoured for clues. “We expect (Fed Chair Janet) Yellen and company to keep the door open for a December move, but without committing to it,” BBH says. “The language should thus be suitably vague.”

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

 

BNP Paribas: U.S. Dollar To Ride Out Dovish Fed With Heightened Easing Prospects Elsewhere

Wednesday October 28, 2015 07:56

BNP currency analysts look for the U.S. dollar to “ride out” any dovish Federal Open Market Committee adjustments “relatively unscathed,” particularly since other central banks may also ease. The FOMC winds up a two-day meeting Wednesday, with BNP looking for only modest dovish adjustments to its post-meeting statement, suggesting the committee likely will leave the door open for a December rate hike if data improve. Dollar positioning is light, analysts point out. “Furthermore, monetary policy developments outside the U.S. remain as important if not more important for near-term USD direction,” BNP Paribas says. “A speech from ECB chief economist (Peter) Praet echoed the dovish signals from last Thursday’s press conference, stating that the central bank has a duty to use instruments it has to fulfill (its) mandate,” BNP Paribas says. “Meanwhile, Japanese press are indicating that the central bank is likely to push back its expected date for reaching its inflation target in its semi-annual report.” Metals traders tend to watch dollar moves closely since base and precious metals alike often move inversely to the U.S. currency.

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

 

TDS: Silver Likely To Correct More Than Gold If FOMC Not Dovish Enough

Wednesday October 28, 2015 07:56

Silver could suffer more than gold if the Federal Open Market Committee is not dovish enough going forward, says TD Securities. Both metals have staged strong rallies since their summer lows, helped when expectations for tightening of U.S. monetary policy were pushed back and the U.S. dollar softened. Traders with short, or bearish, futures positions covered and fresh buying occurred. TDS points out that silver typically rises and falls faster than gold. While the Fed is not expected to tighten monetary policy when a meeting winds up Wednesday, TDS also says policy-makers are likely to keep the “hike dream” alive. “The market is already prepositioned for a fair amount of dovishness from the Fed and may be disappointed if they don’t get more,” TDS says. “This could mean that specs unwind some of their recently acquired hefty gold and silver longs and may want to start looking for new short positions. Hence, both gold and silver may trend somewhat lower in the not-too-distant future, with silver staying true to its nature and posting a more aggressive correction.”

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

 

 

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