Gold Firm After Feds Take “Patient” Approach

gold-163519_640As the Fed’s dovish signals faded Thursday, gold prices finished just under $1200. There is still some safe-haven demand for gold as Russia’s ruble continues to slide.

Following their Wednesday statement, the Fed dropped their pledge to keep rates near zero for a “considerable time” and installed new verbiage stating that the U.S. central bank will be “patient in the beginning” to tighten monetary policy. That being said, the Fed flowered up the statement, saying that the “patient” language was consistent with its prior “considerable time” pledge. “The Fed statement does not imply an immediate rate hike. I think gold can stabilize between $1,180 and $1,200,” said Mark To, Head of Research at Hong Kong’s Wing Fung Financial Group.

The Federal Open Market Committee followed the Fed with their statement. The possibility of the central bank shortening the timeline on higher interest rates was bearish on gold due to its inability to provide a yield.

“The FOMC statement was deemed by gold market traders to be slightly bullish, judging from the modest gains seen right after the statement was released,” said Kitco’s Jim Wyckoff. He added that investors are “still very concerned about the Russian ruble’s sharp drop this week.”

Stronger stocks were suffocating gold and while the Federal Reserve’s policy statement was softer than forecasted, the central bank’s policies were kept intact. As Thursday’s session progressed, gold and silver markets stepped down from their daily highs when crucial outside markets turned from bullish to bearish postures.

Spot gold was up 0.8 percent at $1,197.60 an ounce. On Wednesday, it fell as far as $1,183.73, its lowest since Dec. 1. US February gold rose 0.3 percent to $1,197.60 an ounce. Wall Street’s biggest banks believe the Fed will continually tighten policy and hike the interest rates sometime in the middle of 2015. If so, gold will drop to its most recent low of $1,130. Prices should be supported by Indian and Chinese demand for gold by top consumers.

Posted in Silver | Leave a comment

Should Gold Be Ahead of Fed?

pile-of-gold-coins_bGold has had one of its better months as of late being up just over 3 percent since the beginning of November. Commodities on the other hand, have dropped 11 percent of their value since the plunge of energy prices. But one should ask, even with these dramatics changes, is gold safe and clear? TD Securities commodities researchers say no and are advising investors to “go short again” with recent forecasting of the Fed’s next move.

The Federal Reserve will release their newest policy decision this Wednesday, and that could have a dramatic influence on current events. Everyone is wondering if the central bank will stay true or abandon is famous phrase keeping federal funds rate target ultralow for a “considerable time.” Bart Melek, the head of commodities strategy at TD Securities, believes the Feds statement is “the catalyst which sends gold into a free fall toward new cyclical lows.

TD Securities’s senior commodities strategist, Mike Dragosits, believes that if the central bank does not install such changes, gold will drop to its next “pivot point” at $1,182. Experts believe if the Feds remove their “considerable time” phrase, it was also remove the chance of the first hike in fed funds rate till 2016. If short-term rates are raised sooner than later by the Feds, gold will take a hit due to an increase in short-terms rates increasing the effective cost of holding non-yield-producing assets.

Bill Baruch, a senior commodities broker for iiTrader, shares a similar view on the downside target as the TD Securities crew. “Gold above $1,200 is already pricing in that the phrase will remain, and if it is left out,” writes Baruch, “we expect to see a quick test to the next major support level at $1,178.9 to $1,181.4.”

If gold fell to $1,180, where it bottomed in the summer of 2013, it would be a 2 percent decline from current levels. This past November, gold dropped to a low of $1,130. But not everyone is resting their heads in the bearish camp. George Gero, a precious metals strategist at RBC Capital Markets, reminds us that “this has been a major headwind for a while. Anytime the media started talking about rate rises, gold sold off.” Gero has a hunch the drop in oil prices will provide a boost for gold prices. “I think the sharp drop in energy could be a game changer eventually, as lower costs for consumers could be inflationary this year.”

Posted in Silver | Leave a comment

Gunvor Group to Exit Gold Trading at Year’s End

gunvor-logoCommodities firm, Gunvor Group Ltd., is reportedly getting out of trading precious metals less than a year after they dedicated their business to purchasing gold.

According to individuals with knowledge of the subject, two traders out of Geneva and Singapore are leaving the company. Seth Pietras, the spokesman for Gunvor Group in the Swiss city, declined to comment given the matter wasn’t a public decision.

Gunvor is the fifth-largest oil trader in the world and one of the few large commodity firms that deal in precious metals. Their move into gold was part of their non-oil business expansion that included iron ore, industrial metals and natural gas. Their co-founder and former major shareholder was recently sanctioned by the U.S. due to ties with Vladimir Putin.

Francois Beuzelin, who was hired in 2012 as the head of metals in Geneva, and Cedric Chanu, who in January started working in Singapore as a precious-metals trader, were two of the departures from the company. Both have declined to comment via phone or email on the subject. Gunvor head executives decided to exit the precious metals trading business after running into difficulties finding gold supplies where the origin could be documented.

Flags were beginning to rise once Gunvor began trading physical gold, something neither Glencore Plc (GLEN), the biggest metals trader, nor Trafigura Beheer, the second largest, partake in. Gunvor is still trading in base metals such as copper and aluminum, along with bulk commodities such as coal and iron ore. Cofounder Gennady Timchenko was sanctioned by U.S. in March due to his connections with Vladimir Putin, and after their expansion into other commodities and Asia to diversify beyond trading crude oil with Russia. Now less than 4 percent of the firm’s trading volume is Russian crude oil business.

Timchenko sold his 44 percent interest in the company to fellow cofounder Torbjorn Tornqvist the day before he was sanctioned. The U.S. Treasury Department has investigated Putin and his investments in Gunvor. Putin’s access to the company’s funds is also in question.

Posted in Silver | Leave a comment