ADP reported jobs up 217,000 this morning, giving the Fed another positive sign that it’s OK to raise interest rates at the next FED meeting in December. The FED’s Lockhart said this morning that the upcoming FOMC meeting may be “historic.” If they decide to raise rates, this will be the first increase in the policy interest rate in nearly 10 years.
Gold reacted negatively as the jobs number was published, trading down $5.00 in the February contract to $1,157.60. The price of Gold still remains on the lower end of the recent trading range. Technicians report that the next level of support on the chart is $1,050.00. The question remains, what will it take to move the yellow metal out of its recent price consolidation.
Let’s look to what events recently have moved the price of Gold. ISIS events in the news creates a bid in Gold, while talk about a rate hike creates a sell off. This shows the market is very sensitive to any news but NONE of the stories seem to have a major impact on the price. So we just slide back and forth between the recent highs and lows.
Retail demand continues to be strong, BUT it’s not coming from the investment community. The retail investors who have portfolios in stocks and bonds continue their love affair with strong dividend paying stocks. As I reported in my previous comments, the average financial advisor will not recommend to a client to buy Gold at these levels.
Silver seems to be resilient to any news and seems to be very happy staying above $14.00. But I do expect downside pressure to build in Silver if Gold breaks below the $1,055 area. Sorry Silver you had your day in the sun. However, Silver continues to be the choice of the majority of people buying precious metal products.
After the FED’s meeting in December, I expect we will have some real clarity on where the price of Gold will be headed in the new year.
Author Name: Walter Pehowich
Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.