Gold Continues It’s Decline – Where Will It Stop

Earlier this summer Goldman Sachs called for gold to drop to the 1280 range and then to continue its descent to 1220 and on to the 1100 price range. Many disagreed with their forecast and each time gold ticked higher due to the geopolitical climate the more they berated the outlook. After five days of declines gold is now trading at 1288.10 giving up $7.10 in the Asian session and looks to continue in the red as signs of a stronger than expected US recovery continue to pile up. On Wednesday, traders got some insight into the thinking of the FOMC after the minutes release revealed move behind the scenes support for a rate increase earlier than expected. Speculation that the Fed would reduce stimulus as the U.S. economy recovered spurred a 28 percent decline in gold prices last year. “Many” officials said the central bank may have to raise interest rates sooner than anticipated, according to the minutes of the meeting in July, when asset purchases were cut for a sixth time. Chair Janet Yellen will speak tomorrow at a central bankers’ meeting in Jackson Hole, Wyoming. Gold prices fell on Wednesday as the dollar rallied on economic optimism after the minutes of the Federal Reserve’s latest meeting showed the US central bank has seen progress in the US jobs market.

Precious metals rebounded 7.3 percent this year as conflicts in the Middle East and Ukraine increased haven demand. Israel said it will keep hunting down leaders of Hamas in the Gaza Strip, while the U.S. said it won’t be deterred from strikes in Iraq after Islamic radicals beheaded an American journalist. In Ukraine, the death toll mounted in the conflict between armed forces and pro-Russian separatists in the east. Silver tumbled 105 points in a surprise move as better than expected data should have supported the mixed metal, which is now trading at 19.392. Traders will most likely starting buying up the cheap commodity, while Palladium climbed 10 points to 867, and platinum dipped just $2 to trade at 1426.75

Gold extended losses to a fifth session on Thursday to trade near a two-week low after the U.S. dollar strengthened on indications from the U.S. Federal Reserve that it could raise interest rates sooner than expected. Ultra-calm trading conditions in gold are becoming self-perpetuating as a persistent lack of volatility frustrates investors seeking a return. Mounting violence in Ukraine and the Middle East is prompting investors to seek safety in gold. Russia’s gold reserves rose to 35.5 million troy ounces in July from 35.2 million troy ounces in June. SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.9 tonnes to 800.09 tonnes on Wednesday – a third straight day of increase. Gold prices are expected to move in a range to higher for the day.

Base metals and industrial metals remain weak against the strong US dollar. Copper recovered on Wednesday on strong US housing data but gave back those gains this morning after Chinese manufacturing data missed expectations. Copper is trading at 3.164 well above the 3.09 level earlier this week.