Gold Bears Topple Gold Bulls

Gold traders finally gave in as the markets turned bearish and gold bugs sold off to book profits. Gold tumbled almost $12 to trade at 1165.90 reversing the gains from Tuesday and more. The day’s trading comes on the heels of a precious-metals conference organized by the London Bullion Market Association in which attendees harbored a relatively bearish outlook for gold.

According to gold blog BullionVault, delegates at the event, which ended Tuesday, lowered their average gold forecast for 2016 to about $1,160 an ounce, representing only the second bearish view for gold in the past eight years for delegates of the event. A Wednesday research note from Barclays attributes the relatively more bearish view of gold to concerns about the prospect of an interest-rate increase by the Federal Reserve.

“The U.S. Federal Reserve rate decision was the key factor in people’s minds regarding the flat price direction,” said Barclays, referencing the LBMA conference. Expectations that the Fed will delay lifting interest rates, possibly until sometime in 2016, has helped fuel gold’s recent rise because gold, which doesn’t bear interest, prospers in an ultralow interest-rate environment. Higher rates also are a boon for the dollar, but weighs on dollar-denominated assets, making them more expensive for buyers in other currencies.

Other metals on Comex lost ground including silver which fell 21.7 cents, or 1.4%, lower at $15.70 an ounce, while copper eased 1.4 cents, or 0.6%, to $2.352 a pound. Platinum traded at $1,012 an ounce, down $8.10, or 0.8%, and palladium lost $12.10, or 1.7%, to $682.75 an ounce.

With gold unable to broach its 200-day moving average of $1,175, trading could be quiet ahead of the ECB’s announcement and the Federal Open Market Committee meeting next week. The ECB is unlikely to adjust its €60bn per month asset purchase program in October, but investors believe it may hint at more stimulus later this year.

A member of the ECB Governing Council, Christian Noyer, said there was no need to change the current level of quantitative easing. If the ECB does look at further quantitative easing measures, it will weaken the euro pushing the dollar higher, impacting the gold price.

Investors will be closely monitoring US data and comments from Fed officials on monetary policy to gauge when the US central bank may raise rates. The Fed holds two more policy meetings this year, next week and in December.

Copper eased along with other industrial metals today. Copper is trading at 2.358 down 8 points today. Weak data out of China, the world’s biggest source of metals demand, have soured the mood in the market. On Monday, the country reported its slowest economic growth since the financial crisis, at 6.9% in the third quarter. On the supply side, mining companies such as Glencore PLC and Freeport-McMoRan Inc. have recently announced plans to cut some production, raising hopes that this could alleviate the global oversupply.