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Catching a Falling Financial Knife

Gold ‘Storm’ - Price Could Rise Sharply Next Week On Fed Say UBS and Nomura

Commodities / Gold and Silver 2012 Dec 07, 2012 - 08:08 AM GMT

By: GoldCore

Commodities

Today’s AM fix was USD 1,697.00, EUR 1,312.55, and GBP 1,058.71 per ounce.  Yesterday’s AM fix was USD 1,693.00, EUR 1,295.14, and GBP 1,050.77 per ounce.

Silver is trading at $32.89/oz, €25.54/oz and £20.62/oz. Platinum is trading at $1,599.50/oz, palladium at $684.00/oz and rhodium at $1,045/oz.


Gold rose $4.40 or 0.26% in New York yesterday and closed at $1,698.00/oz. Silver surged to a high of $33.259 and finished with a gain of 0.4%.

Gold $/oz, 5 Days – (Bloomberg)

Gold crept higher in Asia overnight prior to selling, then saw initial gains lost. Gold and silver are headed for their second week of declines.

For the week gold is down 1% and silver is down 1.4% in dollar and sterling terms but the losses in euros and Swiss francs are more muted (euro gold and silver is down 0.5% and 0.9% respectively) due to weakness in the euro and Swiss franc.

XAU/GBP, 5 Days – (Bloomberg)

As expected the ECB kept rates on hold at 0.75% yesterday. The ECB confirmed what more realistic commentators have been warning - that the eurozone economy would contract further in 2013. This is leading to hopes for rate cuts by debtors and concerns of currency debasement by creditors.

The US non-farm payrolls data is released at 1330 GMT and this will be critical ahead of the US Fed’s gathering next week. Yesterday’s US unemployment rate at 7.9% shows that jobless claims have fallen back to a pre-Hurricane Sandy range.

UBS and Nomura have suggested that gold could rise next week as the Federal Reserve may announce further easing at the FOMC meeting – on Tuesday (11/12/12) and Wednesday (12/12/12).

Nomura said it is worth considering whether the FOMC will announce further easing to replace so called ‘Operation Twist’. The research house noted that gold remains at the same level as during the October meeting, which suggests gold has not yet priced in any move by the FOMC – creating an opportunity for gold bullion buyers. 

Regardless of whether the FOMC actually eases at this point – Nomura thinks there is a non-negligible probability – gold is likely to rise. Therefore, Nomura expects gold to rise and prices in this probability as the December meeting approaches, just as gold rose when the September meeting was approaching.

XAU/EUR, 5 Days – (Bloomberg)

In a daily note entitled ‘Gold: Calm Before A Storm?’, UBS said today that expectation of additional quantitative easing next week by the Federal Reserve is not priced into the gold market, so any aggressive move by the Fed would prompt a “sizeable response.”

Index rebalancing will also cause gold to be bought, UBS said in its daily precious metals report today.

The rebalancing action this year should be interesting according to UBS as gold is to “be bought this time around as opposed to being sold in previous years”.

The expected conclusion of the ongoing US fiscal cliff negotiations should also elicit a “considerable” reaction from the gold market. 

“The UBS house view, which is in line with consensus, is that a deal will likely be reached in Washington by year-end. Much of gold’s response will depend on the details, and the price move could be quite powerful.”

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