Gold awaiting more cues from the Fed next week

After falling on Wednesday, the U.S. Comex gold futures (COMEX:GCZ13) rebounded 1.22% to end at $1,350.30 on Thursday. The gold futures dropped about five dollars upon Friday Asian open. Week-to-Thursday, the prices have risen 2.72%. In the past two days, the S&P 500 Index (CME:SPZ13) and the Euro Stoxx 50 Index have fallen 0.15% and 0.22% respectively. The Dollar Index (NYBOT:DXZ13) traded at 79.22 on Asia's Friday morning, down about 0.50% for the week.

Mixed Latest Global Macro Data

The latest U.S. weekly jobless claims were 10,000 higher than expected at 350,000. The October flash PMI for the U.S. was also weaker at 51.1 compared to the expected 52.5 and 52.8 in September. In the Euro-area, the October PMI Composite Index fell to 51.5 from 52.2 in September while the services gauge declined to 50.9 from 52.2 last month. The Euro-area unemployment rate is stuck at 12% although new car sales in September have risen the most in two years. In China, the October flash PMI index jumped to 50.9 versus an expected 50.4, indicating that the economy continues to rebound. However, the seven-day Chinese repo rate has spiked on Thursday to the highest level since the end of July, reflecting tightening financial conditions.

Survey Reflects Optimism

As the market is anticipating a prolonged U.S. stimulus, almost twice as many analysts expect prices to rise next week than to fall, according to Bloomberg. The U.S. Mint sold about 38,000 ounces of gold so far in October, triple the rate in September. The gold-backed ETP holdings also rose by the highest amount on Oct. 22 in a year. However, analysts from Goldman warn that gold prices will remain volatile in a range between $1,250 to $1,350 until the Fed makes clearer its tapering decisions. Equities in the U.S. and Europe also continue to receive new investor inflows.

What to Watch

We will monitor the U.S. October consumer confidence index and the August Shiller housing prices on Oct. 29, the U.S. October FOMC decision and press announcement, the Germany October unemployment change and the U.S. preliminary Q3 GDP on Oct. 30, the Bank of Japan target rate, the E-17 September unemployment rate and the U.S. September core PCE index on Oct. 31 as well as the final October ISM from the U.S. and China on Nov. 1.

About the Author
Austin Kiddle

Austin Kiddle is a director of the London-based gold broker Sharps Pixley Ltd.

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