Gold Weekly Fundamental Analysis – week of May 30, 2016

Gold tumbled all week as the Federal Reserve put rate increases back on the table. Gold traded at 1219.50 losing 3.19% on the week. Market participants now believe there is a 30 percent chance that the Federal Reserve will raise interest rates by 0.25 percent at the Federal Open Market Committee meeting on June 14-15. And while some believe that the Fed has to raise rates in order to save face as members have become more hawkish in recent weeks, the committee still remains data-dependent, and some of the most important monthly data points will be released next week.

Some investors believe, however, that the Fed may potentially wait until later in the summer. “July seems more likely, if not later, like late summer. The last thing the Fed wants to do is jump the gun, yet it must be wary of the slow but steady creeping up in the inflation numbers,” Skip Raschke, founder of SOTDaily.com, said. Fed Chairman Janet Yellen said late Friday in remarks at a Boston speaking engagement, “Probably in the next couple of months, another increase is appropriate.’ ”

The buyers with liquidity kept maintaining gold price as they along with gold hedgers remained busy in manipulating trade and buyers with less liquidity remained cautious for making any sizeable deal in anticipation of downward adjustment in price. The potential buyers at home remained confident dollar-rupee parity and oil prices continuous fall would keep gold prices within buyers’ reach.

Buyers made deals according to their immediate need while general buyers remained on sideline. Local trading in gold remained dull on back of insignificant buying. Gold remains up 15 percent this year after a sharp first-quarter rally, but has fallen nearly 5 percent since the US Federal Reserve’s minutes were released last week.

The metal fell for seven straight sessions to Thursday, its longest run of losses in more than six months, after minutes of the Fed’s policy meeting indicated that a rate rise may be on the cards sooner rather than later. That view has been consistently supported by central bank officials this week.

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.

Major Economic Events for the week: