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Will The NFP Signal A Rate Increase Or Send Gold Soaring?

By:
Barry Norman
Updated: Nov 6, 2015, 05:22 UTC

Precious metals continued to decline as a bevy of Fed Speakers all supported an interest rate increase after Janet Yellen’s testimony to the US Congress

Analysts Expect Gold to Hit 1500$ an Ounce by The End of The Year

Will The NFP Signal A Rate Increase Or Send Gold Soaring?
Will The NFP Signal A Rate Increase Or Send Gold Soaring?
Precious metals continued to decline as a bevy of Fed Speakers all supported an interest rate increase after Janet Yellen’s testimony to the US Congress on Wednesday.  The Federal Reserve is signaling, in the strongest terms yet, that they will raise rates for the first time in a decade in December. They will likely raise by a mere quarter point if they do, but the effect around the world of just the notion that it is really time for “lift off” is as clear as daylight. Bond yields across the yield curve and especially on the shorter end are moving higher, and bond prices are diving as a result.

And all of this is the result of the idea that the Fed may raise rates a measly quarter point after almost 10 years of basically zero; after years of quantitative easing here and still plenty of quantitative easing abroad.

The Federal Reserve is doing everything in its power to make it clear it will not automatically turn to raising rates but will instead be data dependent, whatever that means. They are doing their best to tell us that taking away some of the medicine after 10 years is good for us because it tells us we are finally getting better. The risk is that the patient can’t really stand on its legs yet and that probably happens if it thinks more rate hikes are coming so somehow the Federal Reserve has to persuade the skeptics on that point.

Friday’s nonfarm payrolls report is expected to show a gain of 177,000 jobs with unemployment holding at 5.1%, according to forecasts from economists polled. Gold will zoom and end its bearish trend if U.S. nonfarm payrolls come in below 140,000 for three consecutive months.

gold and sp

Gold dipped in the Asian session to trade at 1106.70 as early traders bought up the cheap metal with strong US dollars. The greenback is holding above the 98 level at near its highest point in several months. Silver added 7 points trading right at the $15 mark while platinum surged $5.40 to 957.30.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund, tumbled to 671.77 tonnes, the lowest since mid-August. On Thursday alone, the fund saw outflows of 8.34 tonnes, the biggest daily drop since July 17.

Fed Chair Janet Yellen said on Wednesday that a rise in rates in December was a “live possibility” if justified by upcoming economic data. The Fed in its October policy statement was deliberately trying to convince investors of a possible December interest rate hike, and was successful in doing so, Atlanta Fed President Dennis Lockhart said on Thursday. Earlier, after the U.S. central bank’s September meeting, investors believed the Fed would delay the first U.S. rate hike in nearly a decade to next year on global growth concerns.

The strength of the US dollar is also weighing heavily on industrial and base metals. Copper fell to 2.25 its lowest price in several months. On Friday morning traders bought up the cheap commodity as it gained 7 points but remains weak at 2.263.

oct nonfarm

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