Gold Slowly Declining Post FOMC Decision

Gold prices continued to ease in the Asian session as traders are slowly being convinced by a bevy of Federal Reserve speakers that the group will increase interest rates in 2015. Gold dipped $1.90 to trade at 1124.90.

Silver diverged from gold to add 17 points to 14.59 while platinum drifted down 7 points to 918.15.

While bargain hunters have stayed away from global equity markets which have also become much more affordable during the summer doldrums, gold traders in China and India made the most of the availability of cheap metal. Gold fell to a five-and-a-half year low below $1,100 in July and averaged $1,117 during August, a price reflected in the import data.

Net gold imports from Hong Kong rose to 59.3 tonnes in August the third increase in a row, according to Hong Kong Census and Statistics Department. Imports from Switzerland also rebounded bringing total imports for the month to close to 80 tonnes.

Hong Kong traditionally accounted for the bulk of imports into the country, but Shanghai and Beijing are becoming important centers for the gold trade so you could add substantial tonnage to those totals. Long the top importer of gold, India fell behind China in 2013, but August data from the sub-continent shows even more robust demand than its neighbor to the north. Despite measures by the Indian government to curb gold imports, official trade data shows bullion imports more than doubled to $4.95 billion or 140 tonnes in August compared to 89 tonnes in July.

Gold’s post-Fed rally was fading with futures in New York exchanging hands for $1,124 an ounce putting gold back in the bargain bin category, but the picture is being complicated by the plunge in platinum, which hit a seven-year low on Tuesday. A research note yesterday from investment bank Barclays argues that the declining platinum price could drive physical demand of platinum in jewellery. Currently, platinum/gold is trading the lowest level in more than 25 years. Although the diesel-engine scandal has a limited direct effect on gold, the price ratio between platinum and gold can affect jewelry demand, shifting some from gold into platinum, especially in markets such as China, where there is a preference for platinum jewelry,” the analysts wrote.

Copper bucked the trend during New York and Asia session, posting gains for the first day since September 21. It repeatedly attempted to re-test at 2.2695, with upward momentum that likely lasts throughout today. Its sister market – the Shanghai Composite – has stayed in green for the whole morning. Copper is trading at 2.266 adding 6 points in the Asian session.  Short-term traders may take advantage of this temporary relief amid bleak outlook as the London Metal Exchange’s base metals index hit a monthly low. News of cost-cutting exercises at copper producers due to falling metal prices keep flowing, indicating the end is not yet over for copper.