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Market watches trade carefully as dollar gains leave gold price flat

Monday, October 17, 2016

Gold investors will be watching the markets carefully this week after the precious metal ended last week flat following a rise in the value of the US dollar.

There is no market data that is likely to impact on the price of bullion due until the end of the week, when the US Federal Reserve Chair Janet Yellen is due to speak at the Boston Fed economics conference.

There is strong sentiment in the market that the Fed will raise US interest rates before the end of the year, which tends to make gold investments less attractive to investors.

Ronald Leung of Lee Cheong Gold Dealers in Hong Kong told Reuters: “There are a

lot of expectations of a Fed rate hike in December, which will be bearish for gold.”

INTL FCStone analyst Edward Meir added in a note: “We think its (Federal Reserve's) rate hiking trajectory will remain very much intact.

“As a result, the dollar will likely push higher going into year-end, offering gold its most formidable headwind and even countering the impact of weaker equities.”

Mr Leung pointed out that uncertainty – which is good for the price of gold – is likely to continue in the run up to the US Presidential election in November. If Hillary Clinton is victorious, he believes the US currency could rise further and reduce the gold price. However, that is without taking into account any unexpected geopolitical events which may happen in the interim.

A pause in the high prices of gold seen throughout the year would mark a good time to buy, but the price remains strong for those who have held their bullion for some time and are looking to make a profit.

In other precious metals news, silver, platinum and palladium all closed the week down in value.