Precious Metals Fundamental Analysis – November 6, 2015 – Forecast – Gold, Silver & Platinum

Analysis and Recommendations:

Gold was flat with small gains and losses most of the day and is trading at 1107.20 after Janet Yellen more or less telegraphed the Feds intention to raise rates in December. Silver fell 74 points to trade below $15 and is currently at 14.985. Platinum gained $2.50 in a reverse move.  Gold took another hit overnight from Chair Janet Yellen’s testimony before the House of Representatives that December rate hike is a live possibility, provided economic data hold up. On top of that, positive employment and slightly narrower trade deficit led to ensuing rally of US dollar while equities, fixed income, and gold sold off.

Gold is also looking vulnerable on the technical side. Large futures speculators or “managed money” investors such as hedge funds have built up huge long positions – contracts that place bets gold will be more expensive in future – since September while cutting shorts at the same time.

Should a positive jobs number increase the likelihood of a rates rise – something gold bulls haven’t had to contend with since June 2006 – hedge funds have 15.2 million ounces or 430 tonnes worth of gold looking for buyers according to the CFTC’s weekly Commitment of Traders data.

At the same time short positions have also been cut dramatically to just 3.1 million ounces creating a huge overhang in the market.

Ms. Yellen, in testimony of the House Financial Services Committee, said a December rate increase is a “live possibility” so long as economic growth picks up steam, the labor market continues to improve and inflation nudges closer to the Fed’s 2% target.

“Everything she said leads to her assessment of a December rate hike being on the table. and that’s what spooked the gold market,” said George Gero, a senior vice president with RBC Capital Markets Global Futures in New York.

Gold prices have lost 6.8% since mid-October as investors recalibrated their expectations of U.S. monetary policy in response to hawkish signals from the Fed. The U.S. central bank surprised many investors by reiterating that a potential shift to higher rates remains on this year’s agenda despite the recent raft of disappointing economic readings. Gold is expected to struggle once rates climb as it doesn’t pay interest and costs money to hold.

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.

Today’s economic releases:

 

Upcoming Economic Events that you should be monitoring:

Friday, November 6, 2015

Government Bond Auctions

Date Time Country

Nov 05 09:30 Spain Auctions Bonos

Nov 05 09:50 France Auctions OATs

Nov 05 10:03 Sweden Holds I/L bond auction

Nov 09 12:00 Norway Details bond auction on 11 Nov

Nov 09 15:30 Italy Announces details of BTPs/CCTeu on 12 Nov

Nov 09 N/A US Holds 3-year note auction

Nov 10 10:30 UK 0.125% 2058 I/L Gilt auction

Nov 10 N/A Holland Eur 2.0-3.0bn 0% Apr 2018 DSL

Nov 10 N/A US Holds 10-year note auction

Nov 11 10:03 Sweden Holds bond auction

Nov 11 11:15 Norway Holds bond auction

Nov 11 10:30 Germany Eur 3bn 0.25% Oct 2020 Bobl

Nov 12 10:10 Italy Auctions BTPs/CCTeus

Nov 12 10:30 UK 4.25% 2039 Gilt auction

Nov 12 N/A US Holds 30-year bond auction