Gold Monthly Fundamental Forecast October 2012

Outlook and Recommendation

Gold closed the month and quarter trading at 1774.35. As the month drew to an end gold surged on global uncertainties and poor eco data in the US but keeps playing a cat and mouse game with the USD.  Gold posted its biggest quarterly rise in more than two years, tracking a weaker euro as Spain’s struggle to control its finances worried investors.

Caution has returned to the market after central banks’ stimulus measures greatly cheered gold bugs and sent bullion up for four straight months. Investors are now seeking fresh catalysts amid the still-grim picture in the euro zone.

Spain’s debt levels are set to rise next year, piling pressure on the government to apply for aid as it pours funds into cash-strapped regions, an ailing banking system and rising refinancing costs, its budget showed on Saturday.

The euro fell to its lowest in nearly three weeks on uncertainty over Spain’s bailout plan, while the dollar index rose to its highest since mid-September, making dollar-priced gold less attractive to buyers holding other currencies.

Soft Chinese factory data sent gold prices falling on sentiment the global economy continues softening. The HSBC China Manufacturing purchasing managers index came to 47.9 for September from 47.6 in August.   A reading of 50 separates expansion and contraction. 
  
Meanwhile in Japan, big manufacturers remained pessimistic over the economy during the July-September period. The Bank of Japan reported earlier that the Tankan Manufacturing index fell to a seasonally adjusted -3 in the third quarter, from -1 in the second quarter. Analysts had expected Tankan Manufacturing index to fall to -3 in the last quarter. 
  
In the U.S., meanwhile, the Chicago purchasing managers’ index contracted for the first time since September 2009, dipping to seasonally adjusted 49.7 compared to 53.0 August. 

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name: Fed Reserve

Date of next meeting or last meeting: Sep 13, 2012

Current Rate: 0.00%-0.250%

Statement highlights of last meeting: Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months. Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable. The FOMC announced QE3.

Economic events for the month of October affecting EUR, CHF, GBP and USD