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29.01.2015 16:20

Gold: a review of the market situation

Gold prices fell today by more than 1 percent, registering the fourth drop in the past five sessions and reached the lowest level since January 16.

The recent wave of recession gold is associated with an article in the WSJ, according to which, the Fed continues to go to higher rates, balancing the hawk and dove hints. Analyst at Wall Street Journal John Hilsenraf said that the Fed observed a balance between those who want to raise the stakes and those who want to leave them unchanged. In a statement, the Fed has no direct comments regarding the growth of the US dollar, but there are words regarding concerns about the movements in international markets. This is an indication that the Fed is closely monitoring the rate of the national currency. The Fed, in its report states that even though the economy is growing "hard", the committee members see that this growth will be moderate in subsequent periods. In addition, the decline in inflation is characterized by the Committee as a temporary phenomenon. The analyst believes that the Fed is going to raise rates in the middle of the year, although markets value the chance to hike in June only 12%. In his article, the analyst argues that "the committee members see a lot of signals that now contradict each other and come from oil prices, inflation, international markets and bond markets. They obviously do not want to jump the gun with the decision. "

Pressure on prices also provided data on the US labor market. As it became known, initial applications for unemployment benefits fell by 43,000 and reached a seasonally adjusted 265,000 in the week ended Jan. 24. This was the lowest level since April 2000. Economists had expected 300,000 new claims. The fall may be due to a shortened work week due to the holiday of Martin Luther King, an analyst said the Ministry of Labour. The data for the previous week were revised up to 308,000 applications compared with the original 307,000.

Optimistic data added optimism about the economic recovery and increased expectations that the Federal Reserve will begin to raise interest rates sooner than previously predicted. Recall expectations rise in interest rates had a negative impact on the dynamics of the price of gold, as the precious metal can not compete with the earning assets with growth rates.

"Investors have already adapted to the new position of the Fed, and they have no reason to seek to raise the price of gold," - said principal analyst at Wing Fung Financial Group in Hong Kong Mark That.

Meanwhile, Phillip Futures experts say that the Fed will raise rates, prices may fall below $ 1,200 an ounce.

The cost of the February gold futures on the COMEX today fell to 1262.50 dollars per ounce.

Market Focus

  • The eurozone started the third quarter on a solid footing, according to PMI survey data
  • Earnings Season in U.S.: Major Reports of the Week
  • German private sector output growth slowed for the second month running in July
  • ECB's Mersch says as conditions normalise, it is unlikely that uncoventional policies will remain necessary
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