Gold Prices Choppy Ahead of NFP

Gold prices have continued to be choppy as the strength of the dollar has been waxing and waning over the past couple of days. The gold prices dont seem to be driven by demand any longer and seem to be driven purely by the risks that exist in different parts of the world and also due to the strength and the weakness of the dollar. Overall, we continue to favor a downtrend in the gold prices and we believe that the gold prices would continue to be under pressure as the various major central banks go about bringing about hikes in the interest rates of the respective countries. Yesterday, it was the turn of the BOE to hike rates and this has now set up a cycle where interest rates are only likely to keep going higher.

Gold Prices Continue to be Choppy

This kind of cycle is likely to last for the medium term and once this cycle fully sets in, what it means is that the interest rate markets and the bond markets would provide a much attractive alternative to the gold markets as safe instruments for a standard income and would drive major funds to the respective regions. This would help the funds to move away from the gold markets and that is the reason why we are seeing the gold prices move lower. The increase in the interest rates from the Fed, which is expected to happen once again in December, is likely to improve the demand for dollar which will in turn weaken the gold prices even further.

The oil prices continue to trade in a mode of consolidation at this point of time after having achieved the important psychological target of $55. This kind of consolidation and ranging is likely to continue for the short term as the market comes to terms with the change in the prices and then the bulls might try to push the prices further beyond towards the $60 region.

Silver prices have also been trading in a choppy manner on either side of the $17 region and this is likely to continue till later in the day when the employment data would be released from the US. This is likely to confirm the rate hike from the Fed in December which should then lead to some dollar strength and hence weakness in the silver prices.