Gold & Silver News | Sept 22nd

Gold futures fell to an eight-month low this week and silver also tumbled to a major low, dropping below USD$18 per ounce, its cheapest in four years^[1]. Demand for precious metals as alternative assets appears to be diminished due to equities surging to an all-time high, a stronger US dollar and rising real interest rates.

Gold and Silver Prices Snapshot (Sept 21st) as at 1700EST:

Source: NASDAQ

Gold saw some early gains but began its drop mid-week after the US Federal Open Market Committee meeting, which raised estimates for its key lending rate and said it plans to keep interest rates low^[2]. On Thursday, gold futures ended lower on speculations that US rate hikes will be faster once the Federal Reserve begins monetary tightening, while on Friday, the strengthening US dollar put additional downward pressure on the metal.

Gold futures for December delivery fell 0.8% on Friday, its biggest drop since September 8, to settle at USD$1,216.60 (AUD$1,362.53) an ounce (down 1.2% on the week)^[3] on the New York Comex. Silver futures for December delivery fell 3.6% to USD$17.844 (AUD$19.9798), the biggest drop since December 19, and touched USD$17.78 (AUD$19.92), its lowest since July 30, 2010^[4]. Overall, the yellow metal is sitting 13% down from this year’s high as the US economy continues to gain traction amid the prospect of rising interest rates and tight inflation.

Forbes reports that the current technical situation for this week’s gold movements shows a fall through an important chart support line around the USD$1,240 (AUD$1389.03) mark. $1200 (AUD$1344.22) could be a possible new support level, with around $1,180 (AUD$1321.82) as the next key support line^[5].

The weekly Kitco News Gold Survey of 24 bullion dealers, investment banks, futures traders and chart analysts reported that seven responses expect higher prices compared to 13 who predicted lower prices for the coming week. Mike McGlone, director of research for US-based ETF Securities, said strong dollar and equities performance is hampering gold and likely to remain that way unless something turns in those markets. Rob Haworth, senior investment strategist at US Bank Wealth Management noted the environment as being unfavourable for gold: “we have higher interest rates than in Europe, we’re on the cusp of raising interest rates, our economy is healthy”, and expected the strong US dollar to last into the new year. Barclays also lowered its price forecast for gold on Wednesday, setting their fourth-quarter average gold price forecast to USD$1,220 (AUD$1366.63) an ounce and their 2015 forecast to an average gold price of $1,180 (AUD$1321.82)^[6].

Next week home sales data and the third estimate of gross domestic product will be released in the US. As home sales has been sluggish recently, weak economic data could give gold a small bounce, Forbes reports.

By Lisa Casagrande | https://www.goldbullionaustralia.com.au