Looking ahead to September – which is historically the best month for gold prices

The gold price oscillated near $1,830 per ounce Friday morning, trading near unchanged on the day. After sliding off its $1,913 all-time high posted on Aug 22, the price of gold has been held in check under $1,850 as investors and traders weigh whether a deeper correction is in the offing.

Economic figures continue to be scrutinized for clues as to whether the recent deterioration in data is merely a pause in a recovery, or a double-dip recession is forthcoming. Tomorrow’s unemployment report from the Labor Department will offer information as to whether the jobs market continues to stagnate. The lack of job creation has helped keep central bankers in the dovish camp with respect to monetary policy – a fact that has helped boost the gold price.

Looking ahead to September – which is historically the best month for gold prices – the upcoming Federal Open Market Committee (FOMC) meeting is likely to serve as the key catalyst for the yellow metal. Michael Churchill, head of Churchill Research, wrote in a note to clients that he expects the Fed to expand its easy monetary policies at the September meeting.

“The August Fed minutes were much more dovish than I would have expected,” Churchill noted. “From the eyes of the FOMC participants, the economy is weak, inflation is firmly under control (and likely to start trending down again soon), the labor market is slack and business confidence is depressed. The FOMC’s statement that it plans an extra day at its September meeting to discuss further easing measures signals quite clearly that the Fed is likely to do undertake some form of additional easing, though probably not under the headline of QE3.”

Although Churchill did not predict QE3, he expects gold prices to remain firmly underpinned. “With the funds rate likely to be pinned at 0.25% for the foreseeable future, and with additional easing measures also in the works, the path of least resistance for gold (and by extension silver) remains upward.”

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also wai...
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad ...
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the...
Read more