Commerzbank Still Sees Year-End Gold Price At $1,300/Oz
Commerzbank maintains its view that gold prices will be around $1,300 an ounce when 2017 winds down. The metal was above this prior to a more-hawkish-than-expected U.S. Federal Open Market Committee Wednesday, but is now modestly below. Gold fell after the Fed meeting as the U.S. dollar rose and yields on 10-year U.S. Treasuries climbed to a six-week high. As expected, the Fed announced that it would be reducing its balance sheet from October. “More importantly, the Fed members stuck with their rate-hike expectations,” Commerzbank says. “The Fed signaled to the market that it would probably raise interest rates one more time this year – we expect this to happen in December – and by three more times next year. Prior to the Fed’s meeting, the market had only priced in one rate hike by the end of 2018. This has now changed somewhat.” As of early Thursday, analysts say, the Federal funds futures were putting the probability of a rate hike in December at over 60%, whereas it was below 40% a week ago. For next year, the market now envisages one and a half rate hikes, Commerzbank says. “However, this still leaves a big gap between the Fed’s expectations and what the market is pricing in,” analysts say. “If the market were to price in further rate hikes, this would presumably keep the gold price in check. Consequently, we still expect to see gold trading at $1,300 per troy ounce at year’s end.” As of 8:53 a.m. EDT, Comex December gold was trading at $1,292.10 an ounce.
By Allen Sykora of Kitco News; firstname.lastname@example.org
TDS: Fed Stance Unlikely To Change U.S. Dollar’s Medium-Term Path
Thursday September 21, 2017 09:20
TD Securities suggests that the more-hawkish-than-expected Federal Reserve on Wednesday does little to change the medium-term trajectory of the U.S. dollar, which had been down. Thus, TDS says it views the dollar’s bounce as an opportunity to re-establish bullish exposure to “convergence currencies” such as the euro and Canadian and Australian dollars. The so-called dot-plot, showing individual policymakers’ expectations for interest rates, was unchanged when traders had thought that officials would have been more dovish than the previous dot-plot. The Fed basically kept the option of hiking rates in December if economic data recover, TDS says. “The flipside is also true, so if the data disappoints, then the Fed will likely keep its powder dry,” TDS says. “Besides the dots, the Fed offered a few other goodies for the hawk: namely, upgrades to growth and employment. Still, while the picture suggests the Fed may have a higher conviction on another hike this year than the market had expected, the Fed continues to mark down its terminal rate and lowered its outlook for inflation. The hurricanes will also distort the data over the coming months while ROW [rest-of-the-world] data remains solid, suggesting to fade the bounce in the USD.”