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Sep 19, 2016

MarketWatch | Markets | Metal Stocks: Gold Bounces From 3 Months Lows as Dollar Advance Proves Vulnerable - September 19, 2016

Rachel Koning Beals
Gold bars
Gold futures prices on Monday bounced from the three-month lows logged on Friday, finding traction as the dollar backtracked in a nervous atmosphere ahead of two key central bank policy-setting sessions this week.
Early Monday, December gold GCZ6, +0.57%   gained $6.70, or 0.6%, to $1,317 an ounce; it traded up to $1,322 an ounce earlier. The ICE Dollar Index DXY, -0.14%  was down 0.2%.
Gold posted a seventh drop in eight sessions to finish last week with a nearly 2% loss. The dollar had made sharp gains last week on upbeat economic data but on Monday, dollar-bulls tempered their hopes for an interest-rate hike from the Federal Reserve on Wednesday. That’s the final day of a two-day meeting for the U.S. central bank, which gathers on the same two days as its Japanese counterpart.
The Fed and the Bank of Japan are generally eyeing divergent directions for their respective monetary policies. Any actions, or simply their commentary, this week could influence their respective country’s currencies as well as dollar-priced assets like precious metals, which tend to move in opposite direction to the dollar.
Increasingly, investors aren’t sure the Fed is ready to act just yet.
Read: How a ‘twist’ by the Bank of Japan could upstage the Fed
“The Fed is widely expected to keep its rate hike powder dry. Slowing jobs growth in August, lackluster retail sales, a flat core [personal consumption expenditure] rate, as well as the collapse in both of the ISM [purchasing manager indexes], have taken a hike at this meeting off the table, in our view,” said Charalambos Pissouros, senior analyst at IronFX Global, in a note.
“Even the modest upside in the August CPI was not enough to boost the very low market expectations for a hike this week,” he said. “What’s more, the latest signals from various FOMC members have been conflicting to say the least, suggesting that a consensus to raise rates is unlikely to be reached. As such, the focus will turn to the updated ‘dot plot’ [of] new economic forecasts and [Chairwoman Janet] Yellen’s press conference following the meeting.”
See: Here’s how the Fed’s doves and hawks will use the new inflation and sales data
Still, the bias toward easing in Japan remains.
“The market still expects the BoJ to cut rates two or three more times over the next two years,” said Marshall Gittler, head of investment research, at FXPrimus.
TimeGold - Electronic Dec 201620 Jun4 Jul18 Jul1 Aug15 Aug29 Aug12 Sep
Meanwhile, December silver SIZ6, +1.71%   rose 30 cents, or 1.6%, to $19.17 an ounce. It shed around 2.6% last week.
The SPDR Gold Trust GLD, -0.25%   was up 0.2% premarket, while the iShares Silver Trust SLV, -1.00%   rose 1.5%. The VanEck Vectors Gold Miners ETF GDX, -0.84%   gained 0.7%. All three ETFs put up losses last week.