Thursday, November 26, 2015

Gold bugs get battered | U.S. GDP revised upward – market reaction indicates rate rise is priced in

Gold is reaching for an important long term support line at the level of US$1044.00 per Troy Oz. This support was established way back at the very start of 2010. It resides just above the psychologically important price of $1000.00.

The fall in the price of gold has been constant since it became apparent that U.S. Federal Reserve easing measures were over and that this heralded the onset of rate rises, on the cusp of which we now seem to be.  Those hedge funds that invested in gold at the start of Quantitative Easing in the U. S. (remember that?), in the conviction that QE was going to lead to rampant inflation, have long since left the scene. They are more likely now to be reminding each other that gold does not, and never will, pay interest to those who invest in it, never mind dividends or yield.

There are still some who hold that a demand for physical gold will provide a return based on capital appreciation, but they have to be very patient indeed, and they must ignore the fact that the volume of physical gold that changes hands is only a small fraction of that which is the subject of options and futures agreements. Who now believes that these are all backed by gold bullion holdings?

U.S. GDP revised upward – market reaction indicates rate rise could be priced in

Tuesday saw a revision upward in the U.S. GDP figures for the third quarter. Normally, a report like this would light a fire under the U. S. dollar, but the market initially went in the opposite direction on the news, and then settled down into a frustrating see-saw type of movement.

This might be taken as a sign that the much anticipated rate rise that we are supposed to see in December is already priced in.

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