Gold Fundamental Forecast – September 16, 2016

Gold continued to trade in a tight range centering on the 1325 price level with little volatility and low volume as traders sit out waiting for the big action next week. At this writing gold is trading at 1324.60 down $1.50 for the session.  Gold prices slipped on Thursday after breaking a five-day losing streak in the previous session, as the dollar rose slightly and uncertain equity markets boosted the metal’s safe-haven appeal ahead of the US Federal Reserve meeting next week.

Asian stocks wavered as investors grappled with the seemingly diminishing ability of major central banks to stimulate growth, while a tumble in crude oil prices added to the risk-aversion mood.

“While the market is predicting relatively low probability for September hike, they now seem to be more convinced that a December hike is highly probable,” said NAB analyst Vyanne Lai.

“The market has been characterized by high volatility than few weeks before… The general trend will be a downward one,’’ said Lai, adding that prices would be below $1,300 by the end of this year and reach $1,100 by the end of next year.

U.S. interest rate futures indicate that expectations of a rate increase next week remain low, but the dollar could benefit from anything in the Fed’s statement that hints at a hike before the end of the year.

Gold is highly sensitive to rising interest rates, which would lift the opportunity cost of holding non-yielding assets.

The dollar was up 0.2 percent against a basket of six major currencies and European stocks. A stronger dollar makes gold more expensive for holders of other currencies.

“The gold market is on the defensive. It has remained under pressure despite the clear and marked reduction in market expectations of a U.S. rate hike later this month,” HSBC said in a note.

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 September 16, 2016

Government Bond Auctions

Date Time Country Auction

Sep 15 10:30 Spain 0.75% Jul 2021 Bono, 1.3% Oct 2026 bond & 1.95% Jul 2030

Sep 15 10:50 France Eur 5-6bn 0% Feb 2019 & May 2021 OATs

Sep 15 11:03 Sweden Sek 0.5bn 0.125% Jun 2019 I/L & Sek 0.5bn 4% Dec 2020 I/L

Sep 15 11:50 France Eur 0.75-1.25bn 0.1% Mar 2021 & Mar 2025 OAT

Sep 19 11:00 Belgium Holds OLO auction

Sep 20 11:30 UK Jul 2047 Gilt

Sep 21 10:30 Denmark Holds bond auction

Sep 21 11:03 Sweden Holds bond auction

Sep 21 11:30 Germany Eur 4bn 0% Oct 2021 Bobl

Sep 22 17:20 Italy Announces details of bond auction