What Is The Fall In Precious Metal Prices Trying To Tell Us

Precious metals prices slid yesterday to a two-week low after a mixed bag of U.S. economic data prompted selling ahead of next week’s U.S. Federal Reserve policy meeting. Gold is flat on Friday morning at 1317.15 which indicates that more traders than are thinking that the Fed might raise rates next week while remaining unsure of what to expect from the Bank of Japan. Silver is tracking gold at 18.962 while platinum remains above its support at 1000. Platinum is trading at 1030.70 down $3.25 this morning.

SPDR Gold Trust GLD, the world’s largest gold-backed exchange traded fund, said its holdings stood at 932.22 down 3.27 tonnes, from previous business day.  Holdings of the largest silver backed exchange-traded-fund (ETF), New York’s iShares Silver Trust SLV, stood at 11281.84 tonnes, remain unchanged from previous business day.

Precious metals futures are trading flat on COMEX. Analysts expect prices to trade range bound for the day, after disappointing U.S. economic data reduced the chances of an interest rate hike next week, though the metal was still on track for its first weekly loss in three.

US Dollar Index traded on a flat note in this morning’s trading session owing to the disappointing release of economic datasets from the nation. Decline in consumer spending has affected retail sales which fell by more than the forecasted levels in August’16. Industrial production, Producer Price Index and capacity utilization rate has also declined more than the forecasted levels thereby adding to the woes.

Due to all the above factors, markets feel that the inflation rate in future months will still remain under the Federal Reserve’s 2 percent target, also constrained by sluggish wage growth. This has dimmed the possibility of a rate hike in the next week’s FOMC meeting. US Dollar Index made an intraday low of 95.06 and ended at 95.28 levels on Thursday and is holding at 95.30 in the Asian session this morning.

Markets are pricing in just a 15 percent chance that the Fed will hike U.S. interest rates during its Sept. 20-21 meeting, according to CME FedWatch. Many now expect a rise in December after the U.S. presidential election.

Industrial metal nickel slumped to the lowest in more than two months on Thursday after worries eased that an environmental crackdown in the Philippines would create shortages. Copper on the other hand soared to its highest level in week against a stronger US dollar. Copper is trading at 2.162 up by 2 points in the morning session. Industrial metals are trading mix on International bourses today. Speculators expect prices to trade range bound for the day as China’s economy shows signs of finding its feet, and concerns seeing the chances of rate hike next week in U.S. are reducing.

Copper settled up 0.23% touching its highest since Aug. 22 on a spate of upbeat Chinese data. Copper prices are holding up well above 320 level compared to other base metals which are still under pressure as support also seen from stocks of copper which slipped 0.7 percent, or 2,275 tonnes, to 349,225 tonnes, data from the LME showed. LME Copper had edged down 0.1 percent to $4,767.50 a tonne, having jumped 2.6 percent on Wednesday when it also touched its loftiest since Aug. 22 at $4,781. Activity seems to be in the range in today’s session as China’s financial markets are closed from Thursday through Sunday for the Mid-Autumn Festival. Meanwhile, Japanese manufacturers’ confidence bounced from a three-year low, while sentiment in the services sector hit its lowest since 2013 when the central bank began bold monetary stimulus, underscoring a fragile economic recovery. Sentiments improved as China’s economy shows signs of finding its feet. Also encouraging signals out of China’s housing market and indications of a revival in its factory sector over the summer have stoked views that demand is quietly cranking up for the third quarter.