Gold Prices Slip on Hawkish Fed

We had mentioned in our forecast yesterday that the gold prices were likely to correct in case the Fed came out with all guns blazing and delivered a hawkish statement. This did not exactly pan out that way but the key was the dot plot that got delivered along with the Fed announcement which clearly showed that the Fed members were leaning towards a rate hike in December. The incoming data from the US had been choppy over the last couple of months which had led to doubts on whether there would be another hike this year. The weaker the data, the more unlikely the Fed would want to tamper with the economy at such a stage and hence the uncertainty continued.

Gold Prices Below 1300

But over the last week or so, we are seeing signs of recovery in the data. Though the data continues to be mixed, the US seems to be on track in achieving some of its economic projections and this has emboldened the Fed to keep its door open as far as the December rate hike is concerned. This was enough for the dollar bulls to pull the trigger and this led to a large round of dollar buying which has since led the gold prices to crash from above 1310 to below 1300 and it trades in that region as of this writing. We expect the gold prices to find some support here and maybe even have a little bounce but the overall trend seems too be bearish for the short and medium term.

Oil prices continued to trade in a steady manner over the last 24 hours as it seems to be totally unaffected by what is happening in the dollar. The uptrend in the instrument continues as it trades comfortably above the $50 mark as of this writing and it looks as if it will move even higher in due course of time. The fundamentals are clearly in favor of the bullish run continuing and the oil producers also want the prices higher and hence it is only a matter of time before we see the price in the $55 region.

Silver prices also weakened as the dollar began to recover in strength across the board ever since the Fed gave a hawkish signal as far as a rate hike in December was concerned.. It now trades just above the $17 region but it is likely to be weak in the short and medium term.