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Gold To Fall Short Of This Key Level In November - INTL FCStone

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Gold To Fall Short Of This Key Level In November — INTL FCStone

(Kitco News) - With gold traders stuck interpreting “tea leaves” as to who will be the next Fed chair, the yellow metal is likely to continue trading in a tight range in November, just below $1,300 an ounce, according to one firm.

“We expect gold to trade within $1,245–$1,295 over the course of the month and suspect that the path of least resistance is lower still given the higher dollar higher rate headwinds that we see remaining in place  during November,” Edward Meir, commodities consultant with INTL FCStone, said in Monthly Market Overview report published on Saturday.

Next week, the focus will be on U.S. President Donald Trump’s new Federal Reserve Chair pick, with nominations of either former Fed Governor Kevin Warsh or Stanford University economist John Taylor likely to put additional pressure on already sluggish gold prices, Meir wrote.

“Investors are busy reading the Trump tea leaves when it comes to picking the next Fed Chairman,” he said. “A dovish appointment (Janet Yellen or Jerome Powell) would be more bullish for gold, while a hawkish pick (Kevin Warsh or John Taylor) would be bearish. We should know something by early next week and just before the President leaves for his Asia trip on the 3rd.”

With geopolitical scene calming down, gold has had an eventful October, trading between $1,262–$1,308.

“With North Korea becoming quiet, focus reverted back to mostly more bearish themes. Specifically, the dollar index spik[ing] on an ECB policy statement that the market took to be quite dovish and [which] put the ECB on a track that is diametrically opposite to where the Fed is on,” Meir noted.

The U.S. dollar, which has been one of the main drivers for gold this month, received a boost from increased optimism surrounding a tax reform package that could be passed in the U.S.

“Expected passage of the bill is resurrecting the ‘Trumpflation’ trade and its aftereffects as investors figure that increased fiscal stimulus will eventually force the Fed to raise rates much more quickly and thus pressure gold in the process,” Meir explained.

On top of that, gold continues to see mixed signs from the physical markets. In Asia, India’s Diwali’s festival brought a boost in buying, but gold demand on an annual level was still 15% lower than last year, according to Reuters.

In the U.S., Mint sales have also disappointed, added Meir, with purchases of American Eagle coins falling 66% from the same time a year ago.

Early on Monday, Asian markets opened with spot gold on trading at $1,272.40, down 0.06% on the day.

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