The positive numbers of the United States reports about its economy helped the US Dollar to grow the last couple of months. Every trader was already bet in favor of this currency and all the circumstances seem to be appropriate for an interest rate rise. Thanks to this suspicions, the US Dollar was getting selected as the favorite investment for many traders, forgetting the all-time-loved gold.
The precious metal had a constant drop to record lows in the last months. But, thanks to the FED Vice President Stanley Fisher’s comments about the interest rate plans, the Dollar’s winning streak is now over. Against all the probabilities, Mr. Fisher said to Bloomberg TV that is not going to be any rise in the next few months.
These comments had an instant impact on the market. Gold futures for December delivery closed up 0.9% at US$ 1.104,10 per ounce. Other precious metals enjoyed the benefits of the situation too. The COMEX showed the Silver futures went up to 3.2% to US$ 15,292 per ounce. Platinum and palladium gained 2.9% and 1.6% respectively.
Mr. James Cordier, president at Optionsellers.com said that “traders believe the FED is giving themselves an excuse for not raising rates in September, and that’s positive for gold”. Mr. Stanley’s comments per se had a serious impact for precious metals’ prices, which can be odd, considering the constant interest of the FED of suppress the gold prices by any means.
In the other way, the demand had improved thanks to the Hindu jewellers. “Since the last week of June, we have witnessed a sudden jump in the demand for gold jewellery,” said Mr. Dinesh Jain, managing director of P.M. Shah Jewellers.
As a motive to his rising demand, a senior trader at Edelweiss Metals Ltd in Mumbai stated that “jewellers have increased buying for the peak festive season, replenishing inventory”. This eastern trend can be equally helpful for gold prices as Mr. Fisher’s comments are. In the meanwhile, China importantly decreased its gold importation because severe financial problems. As the bigger buyer of gold in the world, China’s decision on the precious metal market is heavily affecting the prices.
Thanks to all the negative factors behaving against the gold industry, the traders decided to look away and invest in more “trendy” assets like the US Dollar. Now, prices are recovering as a result of the disappointing FED’s declaration about the interest rates.
It seems really odd that the FED has decided that there is not going to be an interest rate rise in the next month. The financial reports related to several industries gave more-than-positive results. Most investors were assuming already the imminent hike for the US Dollar interest rate. This seems like a good proof of logic forecasting going terribly wrong.
The next weeks is now expected that the gold prices will keep rising. Maybe slower than many are expecting. But, now many investors are disconcerted about the American currency and it’s possible that they will go back to the commodity investment.
Lately, the media has discussed the irregular behavior of the investors. The common action during times like these, with the many financial crisis going on worldwide, is invest in safe havens like gold. Despite this, most of the attention went straight to the Dollar. Starting from this trend, traders started to bet against gold.
Mr. Peter Hug, global trading director at Kitco Metals Inc., declared that a relevant number of players in the markets saw the investing stream and went directly to bet against the precious market, but now, these same players are stepping back, thanks to the last FED’s commentaries and the sudden and unexpected rebound of the gold prices.