Breaking News
0

Gold, Lost Amid Oil’s Mega Rally, Could Flounder After Fed

By Investing.com (Barani Krishnan/Investing.com)CommoditiesSep 17, 2019 11:45AM ET
www.investing.com/analysis/gold-lost-amid-oils-mega-rally-could-flounder-after-fed-200465194
Gold, Lost Amid Oil’s Mega Rally, Could Flounder After Fed
By Investing.com (Barani Krishnan/Investing.com)   |  Sep 17, 2019 11:45AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

As the world’s attention was riveted to the super rally in oil on Monday, investors in gold were left to their own devices, fumbling with little direction on the geopolitical premium appropriate for the safe-haven asset after the historic drone attacks on Saudi Arabian oil fields.

In the end, bullion and futures of gold both added less than 1% each to cross the finish line at just slightly over $1,500 an ounce. Crude oil benchmarks WTI and Brent, meanwhile, jumped about 14% each.

Gold Clueless Again As Fed Looms

In Tuesday’s early hours in Asia, it was back to anemic trading for gold, as traders remained nonplussed on how to continue pricing the yellow metal in the aftermath of the attacks and ahead of what would be an even bigger event for investors — the Federal Reserve policy decision on Wednesday.

To be fair, gold’s clueless state now has as much to do with the hyper uncertainties in oil. While oil bulls and bears both agreed that the path of least resistance for crude in the immediate term was up, without clarity from Saudi officials on the exact turnaround time for the output halted in Saturday’s attacks, it was nigh on impossible to say if oil prices should continue rising when they might have to drop instead. Indeed, WTI and Brent both retreated in Tuesday’s trade.

Very Little Of June-August “Charm” Left

But leaving the influence of oil aside, since the start of this month gold has shown very little of its “June-August charm” which effortlessly took it to six-year highs and seemed at one point even ready to carry it beyond $1,600. Bullion is up about 17% on the year, with virtually all of it coming from the June-August stretch.

In a column a few days back, I asked if the longs in gold will be ready to reach for the stars if the Fed cuts rates again on Sept. 18. Or will they be content to just land on the tree-tops?

If this week’s activity is any indication, then tree-tops is the answer for now.

Gold Futures price chart
Gold Futures price chart

It's starting to look evident that gold will hang out at just over $1,500 or slightly below that, awaiting the Fed’s rate decision — which will likely be another 25 basis points lower, just like in July, which most traders are betting on.

Rate Disappointment Could Take Gold Below $1,500 Post-Fed

From there, unless Fed Chair Jerome Powell provides sufficiently dovish guidance in his post-meeting news conference, it's likely that gold will fall to $1,480 or around there soon after.Backing this prognosis is a note from Canadian broking group TD Securities, which says:

“Given that the market is pricing in additional 60bp of cuts by end-2020, forward guidance will be key,” analysts at TD Securities said in a note. “Our base case is one of disappointment, resulting in a bear flattener.”


Aside from the Fed’s policy text, traders will also be able to see the “dot plot”, where officials of the central bank’s Federal Open Market Committee (FOMC) give their own individual estimates on where the benchmark rate should be.

Economists say that for the median dot to show another rate cut, many Fed officials will have to dramatically lower their own rate projections. There is no certainty that the majority of the 12 voting FOMC members would do this.

Without indications of more easing on the dot plot, the market will count on Powell’s news conference for guidance on whether the Fed will turn more dovish soon. Despite U.S. President Donald Trump’s constant heckling and demand for sharply lower rates, Powell has walked a fine line in balancing the market’s expectations for Fed intervention and telegraphing to the world where he thinks rates ought to be.

But Gold Could Still Finish Year In $1,600 Range

My immediate tree-tops scenario for gold doesn’t mean I’m bearish on the yellow metal in the coming months or beyond.

On the contrary, I believe that we need a safe haven and gold is still the best one out there as the world economy continues lumbering on a path that comforts no one, and the biggest wildcard — the U.S.-China trade war — remains unresolved.

I still expect gold to finish the year in the high $1,600 bracket or more if the Fed stays in an easing mode through its October and December meetings.

And if that momentum carries into 2020, gold could even launch an assault on the all-time highs above $1,900 that it achieved in U.S. dollars back in 2011. Gold has already hit record highs in every currency that matters this year, bar the greenback.

Gold, Lost Amid Oil’s Mega Rally, Could Flounder After Fed
 
Gold, Lost Amid Oil’s Mega Rally, Could Flounder After Fed

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments
Taslima Akter
Taslima Akter Sep 18, 2019 12:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
xauusd, buy or sell,, plz answer me
Moe Zaw Hthik
Moe Zaw Hthik Sep 17, 2019 11:27PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
All brother gold is up and down please idea
Mohd Amir Mahshar
Mohd Amir Mahshar Sep 17, 2019 8:45PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
another clear real and we understand what happan after this..
Moe Zaw Hthik
Moe Zaw Hthik Sep 17, 2019 8:45PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Gold is Up and Down please idea
Barani Krishnan
Barani Krishnan Sep 17, 2019 12:42PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Talha Sheikh, you have to read the full story before you ask me for any clarification. Read the bottom half please.
Talha Sheikh
Talha Sheikh Sep 17, 2019 12:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Till yesterday you were saying that i see gold reaching 1600 dollars and just within 24 hours u are exactly opposite of what u said. May i know the reason for this??
Nick Burns
Nick Burns Sep 17, 2019 12:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
if the fed cuts it will cause hype so gold will drop but then reality will come back around that the fed is cutting to stave off a recession which will cause people to come back to gold on every down turn that comes up as more companies start seeing more and more slow down s ....if they do that is
Barani Krishnan
Barani Krishnan Sep 17, 2019 12:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Yes, in a matter of months, gold WILL be up. It's just that it's a slow burn at the moment.
Talha Sheikh
Talha Sheikh Sep 17, 2019 12:05PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
where do you expect gold to reach till september end
Hamid Sheikh
Hamid Sheikh Sep 17, 2019 11:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Another excellent read!
Barani Krishnan
Barani Krishnan Sep 17, 2019 11:40AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks, Hamid. Do follow us @Investingcom. My personal handle is @barani_krishnan
Aravind Tallam
LiveKingSize Sep 17, 2019 11:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With most of the data being good the chances of a Fed date cut are lower and if the Fed doesnt cut then as you said Gold will drop
Barani Krishnan
Barani Krishnan Sep 17, 2019 11:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Whichever way, immediate term doesn't look too good for gold longs. But wait out a couple of months and there could be a better pay day.
SunilKumar Dixit
SunilKumar Dixit Sep 17, 2019 9:31AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Barani Krishnan your observations are impeccable, pointed and factual. Gold is poised for $1600 & $1900 and beyond albeit a *****of roller-coaster mid-way
Barani Krishnan
Barani Krishnan Sep 17, 2019 9:31AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks. Please follow us @Investingcom. My handle is @barani_krishnan
Pancherry Pancherry
Pancherry Pancherry Sep 17, 2019 8:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Sir gold is high prise or down prise
Barani Krishnan
Barani Krishnan Sep 17, 2019 8:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Around 1500 till Fed; then lower
Pancherry Pancherry
Pancherry Pancherry Sep 17, 2019 8:14AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Moe Zaw Hthik
Moe Zaw Hthik Sep 17, 2019 6:13AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Sir gold is up or down please
David Oirere
David Oirere Sep 17, 2019 4:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
useful information for real Barani
Barani Krishnan
Barani Krishnan Sep 17, 2019 4:27AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you for the feedback, David. Please follow us @Investingcom. My handle is @barani_krishnan
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email