Gold Monthly Fundamental Forecast November 2012

Outlook and Recommendation

Gold remained strong but directionless at the end of the month, staying in a tight range in the low 1700’s to close the month at 1720.45. Earlier in the month gold bulls threatened to break the 1800 price level but this never happened. With the injection of stimulus from the FOMC, gold climbed but as the day’s ticked by, and more positive numbers came from the US, the outlook for additional stimulus declined easing gold downward.

The outlook for global growth remains on investors’ radar screens. The imminent leadership changes in China and the United States (US) will also have a material impact, as the effectiveness of China’s multiple stimulus mechanisms and the fiscal consolidation needs and efforts in the US are assessed. The recently unveiled World Economic Outlook report by the International Monetary Fund (IMF) is broadly in line with our view that the European economic distress will extend through the next two years and that a lasting and comprehensive solution to Europe’s structural employment weakness and debt sustainability concerns is not firmly in prospect in the near term. Official intervention in systemically relevant currency and fixed income markets remains the norm through traditional and unconventional means

In the first half of the year, central banks bought 254.2 tonnes of Gold, according to the World Gold Council (WGC). This was up from 203.2 tonnes in the same period last year.  The buying has tended to come from central banks in developing countries, which suggest they are putting a proportion of the proceeds from their trade surpluses into Gold, rather than have too much exposure to hard currency. Considering what lies ahead for the US in the fourth quarter, analysts are unsurprised dollar holders may be nervous. Potential for dollar weakness Up until the recent move higher in Gold, the popular safe havens seem to have been the US dollar, the yen, US treasuries and German bunds. We have viewed all these as being overbought in recent months and it is interesting that the dollar has shown some weakness recently. With the US election on 6thNovember rapidly approaching and the budget deficit, deficit ceiling and the fiscal cliff all likely to become issues before and after the election, we feel there is a significant risk that the dollar could come under further downward pressure. With the other safe-havens mentioned above still looking overbought and being fiat-products too, we feel there is potential for Gold to regain market share as a safe-haven.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name: Fed Reserve

Date of next meeting or last meeting: Dec 12, 2012

Current Rate: 0.00%-0.250%

Economic events for the month of November affecting EUR, CHF, GBP and USD