2017-07-28 Fri

Gold shut down $2.70 at 1,249.40 and this took place just before the FOMC released its views concerning interest rates. This will have its effects in the Gold Bullion Coins market. Investors all over the world have been showing their interest in bullion gold coins. However, gold opened a little lower, reaching $1,245.00 before turning higher. The Precious Metals Market was, however, higher in the aftermarket by $13.00, indicating that traders believe this FOMC release was soft on interest rates and even softer on the Fed’s massive balance sheet.

The Fed kept the interest rates stable and said they would unwind their oversized balance sheet. It was totally unexpected for them to raise rates as the meeting was not associated with the Summary of Economic Projections in which a press conference is held by the chair.

The meeting was a subtle one but after that, the Federal Reserve has decided to raise interest rates and will begin reducing its balance sheet in September or December. This will cap the price of gold but the downside here is not going to be drastic - physical demand is already picking up in China and India.

The Dollar index moved from 94.00 to 93.50 after the release so traders will look at this turn as favouring gold in the shorter term. A gold focused research team based in the UK says gold continues to see range-bound trading and this lack of direction is likely to stick until the end of the year.

Four weeks back, gold prices were on an all time high but now they have cooled off. However, the analysts remain bullish beyond 2017, with several factors working on resuming gold’s recovery. The country’s materialistic growth on fiscal accommodation in the U.S. seems sceptical now, adding that any uncertainty from the Trump’s administration would also boost safe-haven gold. The monetary policies are bound to remain accommodative, while nominal and real interest rates would remain very low.

The above steps will give a boost to gold since institutional investment in gold has remained light. The equity prices are expensive, particularly when compared to gold, the risk reward arguments should lead to at least a partial rotation back in favour of the yellow metal.

Enough is said about the US dollar versus gold metric, so how about talking about something else for a change. The price of copper has been trending higher lately, thanks to the strong Chinese interest – as a building material. The price of copper is a great indicator of what is happening in worldwide commerce – moving higher things are upbeat as nations spend money on infrastructure – this is now the case in China. And the price of gold relative to the price of copper has a lengthy history of strong correlation – which means they usually travel in the same price direction. As China continues to push the price of copper higher some believe that the price of gold may soon follow.