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Economic Growth, Fed Policy, and the Price of Gold

From day to day and week to week, short-run fluctuations in the price of gold have, of late, been driven almost entirely by expectations of prospective Federal Reserve monetary policies, particularly with respect to short-term interest rates. In turn, these expectations have been driven by the flow of economic data and the somewhat opaque and contradictory comments by one or another Federal Reserve official. Here’s what’s going on: Signs of an improving economy lead the gold and financial markets to expect the Fed will begin raising interest rates sooner rather than later – a negative ...

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Back from Vacation: The More Things Change . . .

I’m just back from a two-week vacation from the gold market.  In the interim much has changed – especially the metal’s price, which has fallen some $65 to $75 an ounce.  That’s more than five percent – but no reason to despair! While the price has weakened, the metal’s fundamentals, fundamentals we have discussed in past reports, have continued to improve, so much so that some bounce-back now seems likely – with bigger gains due later this year. ...

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Gold Insights on Recent Price Action

The past few weeks have been trying times for gold investors.  In mid-March, just when it looked like gold prices were set to break out into higher territory, the market shifted into reverse, leaving many investors and analysts wondering what was going on. To put some numbers on it, at its recent low point, gold was off some eight percent from its mid-March six-month high – and is continues bouncing around within the technically significant $1265 to $1305 range.  A breakout in either direction could set the market’s tone for the weeks ahead. That said, we’ve never put much faith in ...

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Gold Slumps as Wall Street Soars

With the Dow topping 16000 and the S&P500 index reaching 1800 – both psychologically important levels – gold continues to be an innocent victim of the frenzy on Wall Street. Trading around $1245 an ounce the metal’s price is off some 25 percent from the start of 2013 and is 35 percent below its September 2011 all-time high. Reflecting the super-stimulative monetary policies currently pursued by the U.S. Federal Reserve, the Bank of Japan, and the European Central Bank, U.S. and world equity markets are achieving new all-time highs as more and more investors jump on the stock-market ...

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Tapered Expectations

Long constrained between $1,180 and $1,300 an ounce, gold has finally broken out on the upside, only to find itself trading within a new, albeit higher, range. Gold now enjoys a "floor" of solid support at $1,300 with initial support kicking in around $1,340. On the upside, initial resistance kicks in around $1,385 and continues up to the psychologically important $1,400 level - but, as outlined below, this "ceiling" could prove vulnerable in the weeks ahead. ...

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Gold Market Update

Although continued “uncertainty” and “caution” remain the gold market’s watchwords, the odds favor further gold-price recovery in the weeks and months ahead -- despite continuing attempts by large-scale speculators and institutional traders,  driven by computer models and momentum indicators, to knock gold prices lower. For the moment, we believe gold prices are still in a “bottoming phase” and may have more work, technically speaking, around recent levels before breaking through overhead resistance and moving substantially higher.   ...

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Fed Speak: Implications for Gold

This week's gold-price action reflects a market once again range bound, searching for direction in an uncertain economic environment.  For sure, the risks of further gold-price retreat remain high.  Much depends on the market's sense of prospective Federal Reserve policies. This Wednesday the financial markets will be listening carefully to the latest Fed speak on monetary policy and the economy for clues. First off, the FMOC will be releasing the minutes of its April policy-setting meeting -- always an interesting document to Fed watchers who, like the Greek oracles, look for meaning in ...

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GOLD — What’s Going On?

Gold prices have caved today under pressure from dollar appreciation and wave of technical selling at key chart points - selling aggravated by continued flow of funds from gold (and commodity indexes) to equities. Just as the rising price trend in the equity indexes has attracting more buying, the renewed downward momentum in gold is engendering short sales and more outflows from gold ETFs. Importantly, program trading and other technical strategies have added to the downward pressure on gold - and continue to do so.  (See my previous commentary posted earlier today for more on program ...

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Dark Pools, Program Trading and the Decline of Gold

Day after day, gold trading has been, and continues to be, dominated by institutional trading in the "dark pools" where over-the-counter dealer and interbank activity goes largely unseen. Don't under-estimate the influence of trading in the dark pools where "invisible" institutional trading can - in a flash - knock gold to the mat, leaving most gold-market participants and observers wondering what happened. Indeed, much of this activity in the interbank and dealer market goes unreported - but buy-sell transactions, high-frequency, and other program trading in these dark pools, often at ...

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Monetary Policies Favorable for Gold-Price Recovery

Global financial markets will be taking their cues from U.S. Federal Reserve and European central bank policy meetings to be held by the Fed on Tuesday and Wednesday and by the European Central Bank (the ECB) on Thursday. The consensus among economists who pay attention to these things suggests there won't be any significant change in Fed policy . . . but, in contrast, there is a strong belief that the ECB will cut European interest rates from their already record low levels. ECB Expectations The ECB has seen a disappointing string of European economic data over the past several weeks. ...

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