Gold prices drop for the sixth straight week

Friday, November 27, 2015

Gold prices are on track to close lower for the sixth straight week as an increasing number of investors expects the Fed to increase interest rates at next month’s FOMC meeting. Spot prices for the yellow metal have come under considerable pressure since mid-October, slipping from a multi-month high around $1,191/oz to below $1,070/oz currently, a loss of over 10%. SPDR Gold Trust ETF holdings have experienced significant outflows as a result of the renewed hawkish view on interest rates with total holdings reaching a fresh multi-year low towards 655 metric tonnes, having dropped 5% this month alone as investors fell out of favour with the precious metal. Downside pressure has been compounded by a stronger dollar which has hovered just below 100.00 for the past week.

Japanese economic data released late last night was less than impressive to say the least, prompting some modest weakness across Asian equity indices as the quiet optimism seen in Europe failed to spill over to the overnight session. Lacklustre inflation data and a decline in household spending, which slipped 2.5% in October against expectations of holding flat year-on-year continue to pile the pressure on Prime Minister Shinzo Abe and his government. Core CPI, excluding energy and food prices accelerated 0.7% in October, down from 0.9% y/y the previous month and slightly below expectations of 0.8% y/y. The yen, having faced considerable headwinds from a robust USD, has struggled to gain any significant ground against the greenback with key resistance towards 122.25 proving particularly difficult to breach.

Three month copper prices are finding it tough to hold onto yesterday’s gains early on this morning, with prices traded on the LME hovering around yesterday’s close, towards $4,620/tonne. Early moves towards $4,700/tonne failed to gain any traction, mimicking yesterday’s exasperated moves towards $4,740/tonne. Hopes of a close back above $4,700/tonne are quickly fading but with investors watching how a potential probe by the Chinese regulators into short selling pans out we could experience short term spikes higher.   

Gold prices remain under pressure ahead of next month's FOMC meeting

XAU Curncy Gold Spot Oz D 2015 11 27 08 12 24

JPY struggles to gain ground against the USD

JPY Curncy Japanese Yen Spot 2015 11 27 08 31 37

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Topics: Copper, USD, Gold, JPY, LME
More from: Kash Kamal