Gold Fundamental Forecast – July 29. 2016

Gold rallied after the FOMC statement gaining over $16 today trade at 1350.85 with a day of little data and headlines as attention turns to the US elections. Gold rallied after the Federal Reserve stopped short at this week’s policy meeting of indicating that a further increase in U.S. interest rates is on the cards for later this year.

Uncertainty over the path of interest rates has held gold in check since it rallied to more than two-year highs in the wake of Britain’s shock vote last month to leave the European Union. Relief that the Fed was not more explicit about rates pulled it back to a two-week high.

The Federal Reserve did say near-term risks to the U.S. economic outlook had diminished, potentially leading to a resumption of monetary policy tightening this year. However, it gave no indication whether it would raise rates at its next meeting in September.

Gold is sensitive to rising U.S. rates, which would lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

The FOMC statement that showed no change in U.S. interest rates did not move gold and silver markets much, initially, but they began to rally after traders and investors reckoned the statement did not contain any new hawkish elements on U.S. monetary policy, and arguably favored the doves. The FOMC statement also said U.S. interest rates will rise only slowly over time but did say the U.S. economy is on the upswing.

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Upcoming Economic Events that you should be monitoring:

Friday, July 29, 2016

Government Bond Auctions

Date/Time Country Type

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction