Strengths
The best performing precious metal for the week was silver, with a gold-inspired lift of 4.80 percent. It is typical for silver to have a higher beta to gold. Gold is headed for its biggest weekly advance since July, reports Bloomberg, following the Federal Reserve’s decision this week to leave interest rates unchanged. The 25-percent rally that gold bullion saw in the first half of the year has sputtered this quarter, partly on concern that the Fed could have raised rates as soon as this week. In a similar fashion, gold futures gained after the Bank of Japan changed its focus on Wednesday (as traders awaited the Fed decision), from expanding the money supply to controlling interest rates. According to the average estimate in a survey of 16 participants at the Denver Gold Forum this week, gold prices will reach $1,385.63 an ounce by year end, reports Bloomberg. This forecast is 4.1 percent higher than Wednesday’s closing futures prices. As seen in the chart below, investors poured $249 million into gold-backed ETFs over the last week, the article continues. This has helped keep holdings near a three-year high. Weaknesses
Although gold was the worst performing precious metal for the week, it was a welcome gain none-the-less in light of worries surrounding a possible rate hike this month. Saxo Bank’s head of commodity strategy Ole Hansen believes that gold is due for a correction. Hansen recognizes that gold gains have been elusive lately, but says that the ‘market has become stale’ and prices have ‘struggled to move higher.’ He sees the metal falling back to the $1,250 per ounce level, but says once the stale longs have been cleared out of the market, gold could rise to $1,375 per ounce.
This post was published at GoldSeek on 26 September 2016.
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