This morning the gold price has fallen having hit a three-week high of $1,284/oz. the fall comes following profit taking and upbeat US factory and builder sentiment data.
Later today the Fed’s FOMC meeting will begin, in tomorrow’s announcement following the meeting markets will be looking for any pointers on when the committee intends to raise interest rates.
The climb to a recent high comes thanks to safe haven purchases on the back of the situation in Iraq. It is not surprising that there was some profit taking yesterday, the yellow metal had climbed in the previous seven sessions by nearly 4%. This rapid climb is an indicator that investors are not so convinced about the stability of the financial and political structures at present.
Whilst conflict concerns in Iraq are likely to provide some support for the gold price, this is unlikely to be sustained as central banks’ monetary policy returns to take centre stage for the rest of the year. Earlier this year it was the Ukraine crisis that was providing support to gold. This is hardly mentioned any more, despite issues over gas supply and a plane having been shot down by pro-Russian separatists.
Gold’s 5.9% climb so far this year is in part thanks to geopolitical tensions. Should the US, and its allies announce military steps then we will see a climb in the gold price, however as we have stated many times this will not be a gain that will hold for long.
Holdings in the SPDR Gold Trust saw their biggest decline since mid-April, yesterday. There were outflows of 4.2 tonnes, total holdings now sit at 782.88 tonnes; a near five year low.
Platinum and palladium deal still on the cards
Both Platinum and Palladium continue to make gains as markets await to see if a deal has been reached between mining companies and AMCU. Last Friday strong indications were given that a deal was imminent. There were some media reports yesterday that AMCU’s president, Joseph Mathunwja had been forced to accept a wage deal and that workers were expected to return to work today.
Silver fix is bullish
ETF Securities are bullish on Silver. In a note released yesterday they explained that whilst silver has risen with gold it is its industrial qualities that will help it rise over the coming months, ‘“With the most recent data from China showing signs of a rebound and the reserve ratio cuts by the PBOC (People’s Bank of China) adding to potential momentum, we expect cyclical commodities like silver to continue to benefit,”
Yesterday Bloomberg reported that the London Metal Exchange intend to have a testing process to replace the London silver-fixing benchmark, ready in two-weeks ahead of the August deadline when the current fix will end. Despite a very prompt reaction of Twitter users saying that the LME should just end the fixing, there are apparently three solutions and suggestions in place. Whilst just two firms would be left running the current fix, Bank of Nova Scotia and HSBC, the LME report that 10 firms have expressed an interest in helping to run the new silver fix.