Chinese Bargain Hunters Buying Gold
Gold futures closed at the lowest level since February as the Fed is expected to raise interest rates, as US equities tap at record highs luring money out of safe havens and fund holdings collapse.
Meanwhile, Chinese retail buyers are stepping in to take advantage of the low prices.
“Gold sellers in Hong Kong, where mainland Chinese often buy gold, report an increase in purchases, some of it for weddings around this month,” according to published reports. “Some of the buying is also because of the Lunar New Year period next month, a time when buying normally picks up.”
The precious Yellow metal is ending Y 2016 on lows as investors price in the Fed’s probable move this week, pushing bond yields higher amid the likelihood of further hikes in Y 2017.
A gauge of the USD has climbed since the US elections, while the S&P 500 and the DJIA are at all-time highs on speculation President Elect Donald Trump’s policies will trigger and drive growth. Investors are also assessing the ECB’s decision last Thursday to tweak its bond buying.
The rally in the dollar, bond yields edging higher and the positive performance of the equity markets are signs of risk-on appetite, which is negative for Gold.
Gold futures for February delivery fell 0.9% to settle at 1,161.90 at 1:59p on the COMEX in New York. It’s the lowest close since February and have bounced and trade at 1,164.20 in late afternoon.
Investors see a near 100% probability US policy makers will raise the benchmark rate at their 13-14 December meeting to deliver the 1st rate increase of the year. The Dollar Spot Index surged 3.9% in November for the biggest monthly increase in 2 years.
The precious Yellow metal’s most accurate forecaster tracked by HeffX-LTN in Q-3 said there may be more pain ahead.
Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp., sees gold at 1,175 in Q-1, and 1,150 in April to June, 1,125 in Q-3, and 1,100 by Q-4
“With the U.S. Fed most likely to raise interest rates next week by 25 basis points, the firmer dollar is a very, very strong factor to limit any rally,” Mr. Gan said.
Aside from the Fed’s decision, the markets will be looking for is on the trajectory for rates into Y 2017.
|HeffX-LTN Analysis for GLD:||Overall||Short||Intermediate||Long|
|Very Bearish (-0.65)||Very Bearish (-0.72)||Very Bearish (-0.76)||Bearish (-0.46)|
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