Analysis and Recommendations: Expectations for a U.S. rate hike in December pressured gold, silver and platinum last week. The physical market also
December Comex Gold futures traded to nearly a six-year low while posting a fourth straight weekly loss, on expectations the Federal Reserve is set to raise its benchmark interest rate next month for the first time since 2006.
Last week’s downside price action and increased volatility was primarily driven by a slew of Fed officials who issued hawkish comments at various times during the week.
December Comex Gold futures finished down $4.30, or 0.40% at $1083.40. December Comex Silver futures closed the week at $14.23, down $0.46, or 3.13%. Platinum futures were down the most last week, dropping 8.36%, or $78.60 to close at $861.40.
Rising interest rates tend to weigh on gold prices, as they lift the opportunity cost of holding non-yielding assets while boosting the dollar. Additionally, gold doesn’t pay interest or a dividend which drives down demand from investors.
Gold is down more than 5 percent since October 28, primarily driven by the stronger-than-expected U.S. Non-Farm Payrolls report released on November 6. The report raised the odds of a December rate hike from 30% to 70%.
Activity in precious metals ETFs also played a role in last week’s sell-off. Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, fell sharply last week, including a 1.5 tonne decline on November 12.
January Platinum futures also came under pressure from fund selling. Holdings of platinum ETFs were at a two-year low. In increase in supply from ETFs and other liquidation took platinum to a seven-year low. A drop in palladium prices also contributed to the selling pressure.
Bearish fundamentals could continue to pressure the precious metals sector this week although technically oversold indicators suggest the markets are ripe for periodic short-covering rallies. Gains are likely to be limited if the U.S. Dollar picks up strength.
The key report to watch this week is Tuesday’s U.S. consumer inflation data. It is expected to show an increase of 0.2%. A firmer number will be bullish for the dollar, and would likely solidify a December Fed rate hike. This would underpin the dollar and likely trigger a further decline in gold and silver.
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 up to the data analysis and information in our weekly reports.
Major Economic Events for the week:
Date Time Curr Events Forecast Previous
Sun Nov 15 |
All Day |
ALL |
G20 Meetings |
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Mon Nov 16 |
8:30am ET |
USD |
Empire State Manufacturing Index |
-5.3 |
-11.4 |
||||
Tue Nov 17 |
8:30am ET |
USD |
CPI m/m |
0.2% |
-0.2% |
||||
USD |
Core CPI m/m |
0.2% |
0.2% |
||||||
9:15am ET |
USD |
Capacity Utilization Rate |
77.5% |
77.5% |
|||||
USD |
Industrial Production m/m |
0.1% |
-0.2% |
||||||
17th-19th |
USD |
Mortgage Delinquencies |
5.30% |
||||||
10:00am ET |
USD |
NAHB Housing Market Index |
64 |
64 |
|||||
4:00pm ET |
USD |
TIC Long-Term Purchases |
20.4B |
||||||
Wed Nov 18 |
8:00am ET |
USD |
FOMC Member Lockhart Speaks |
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8:30am ET |
USD |
Building Permits |
1.15M |
1.11M |
|||||
USD |
Housing Starts |
1.16M |
1.21M |
||||||
10:30am ET |
USD |
Crude Oil Inventories |
4.2M |
||||||
2:00pm ET |
USD |
FOMC Meeting Minutes |
|||||||
Thu Nov 19 |
8:30am ET |
USD |
Unemployment Claims |
272K |
276K |
||||
10:00am ET |
USD |
Philly Fed Manufacturing Index |
0.1 |
-4.5 |
|||||
USD |
CB Leading Index m/m |
0.5% |
-0.2% |
||||||
10:30am ET |
USD |
Natural Gas Storage |
|||||||
12:30pm ET |
USD |
FOMC Member Lockhart Speaks |
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Fri Nov 20 |
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Sat Nov 21 |
12:00pm ET |
USD |
FOMC Member Williams Speaks |
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.