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INTL FCStone: Gold Price Retreats Ahead Of Fed Meeting

Kitco News

Comex gold remains on the defensive at the start of a week that includes a two-day meeting of the Federal Open Market Committee. Shortly before 9 a.m. EDT, Comex December gold was $9.90 softer to $1.315.30 an ounce. “Gold is being pressured both by a stronger dollar, especially against the yen -- now at an eight-week low of 111.50 [yen] -- coupled with nervousness ahead of the two-day Federal Reserve meeting that starts tomorrow and culminates in a policy statement and a [Fed Chair] Janet Yellen press conference on Wednesday,” says Edward Meir, commodities consultant with INTL FCStone. “Although no rate increase is expected this week, investors are expecting details about the Fed trimming its $4.5 trillion balance sheet. Meanwhile, the odds for a year-end rate increase are still quite low, said to be less than 50% and even as low as 35%.”

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

 

Commerzbank: Improved Risk Sentiment Pressures Gold Prices

Monday September 18, 2017 08:03

Gold prices have fallen to their lowest level of the month as risk sentiment improves in other markets, taking away potential demand in the yellow metal as a safe haven, Commerzbank says. The Dow Jones Industrial Average and S&P 500 both hit record highs Friday, and stock index futures are pointing to more gains early Monday. “What is more, bond yields in the U.S. have increased significantly of late, which makes gold less attractive as an alternative investment,” Commerzbank says. “Presumably this is also why Friday saw the second consecutive daily outflow from gold ETFs [exchange-traded funds].” December S&P stock-index futures were up 4.90 points to 2,502.10 as of 7:50 a.m. EDT. Meanwhile, Comex December gold was down $7.80 to $1,317.40 an ounce and bottomed at $1,316 overnight, its lowest level since Aug. 31.

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

 

Analysts: Investors Watching Fed For Balance-Sheet News

Monday September 18, 2017 08:03

Much of the market focus this week will be on expected Federal Reserve balance-sheet normalization when policymakers wrap up a two-day meeting on Wednesday, analysts say. Sean Lusk, director of commercial hedging with Walsh Trading, comments that Wall Street has factored in pretty much no chance of a rate hike this week. “The focus will probably be on how the Fed might handle its widely expected balance-sheet reduction announcement,” Lusk says. Hussein Sayed, chief market strategist with FXTM, suggests that balance-sheet normalization “probably won’t have a significant impact on the dollar, as the Fed has been preparing markets for many months.” However, markets also don’t know the long-term implications of this process, the analyst continues. “Normalizing the balance sheet will likely put U.S. long-term Treasury at risk when the supply begins to increase. This will not only impact yields on bonds, but will also have a negative influence on U.S. equities.” Brown Brothers Harriman says that balance-sheet reduction “seems to be underappreciated by many investors” and that Fed officials have made “clear and at what pace” the balance sheet will shrink. “It will simply not recycle the full amount of maturing bonds and MBS [mortgage-backed securities] in its portfolio,” BBH says. “It seeks to put the program on near automatic pilot, not to be influenced by the vagaries of the economic data or the proximity to its goals. The pace will begin slowly at $10 billion a month ($6 billion Treasuries and $4 billion MBS). The pace will increase by $10 billion a month every quarter until reaching $50 billion a month.  We suspect in the initial period the market impact will be minor, but as the terminal velocity of $150 billion per quarter is approached, the risk of disruption seems to be greater.”

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