Daily Nugget: Gold Prepares To Rise Ahead Of FOMC

Yesterday the SPDR Gold Trust saw its biggest outflow since October 21, of 8.70 tonnes. Total holdings now stand at 818.90 tonnes.

The gold price climbed overnight, ahead of the FOMC meeting which will commence today. General consensus is that tapering will not go ahead until March. This may cause some speculators to cover their positions ahead of the meeting.

Data from COMEX shows that market participants still hold significant short positions on gold, which is bullish for the price.

It is clear that little is expected from the Fed announcement, hence why we have seen both the gold and silver price pull back from recent lows. However, this morning both gold and silver have handed back some of the gains seen in the last two days. Silver touched back below $20.

Last night Reuters reported that the Indian government is not looking to loosen the current controls on gold imports, despite an improvement in the trade deficit. The decision to maintain controls comes on the back of the FOMC’s lack of action over tapering. According to a Reuters source the Indian government are concerned that tapering could ‘come at any time (and) that could have severe implications for the rupee.’

One country that will be lifting restrictions, although in the opposite direction, is Vietnam. From January 1 the government will phase out export duties on gold jewellery. The move is being carried out in the hope that domestic companies will be encouraged to export their products, amidst low domestic demand.

In contrast to its peers, palladium has outperformed most other metals this year. Earlier this month the platinum: palladium ratio hit a decade low of 1.84. This is perhaps not surprising given the tensions surrounding South African mine supply and increasing demand. However, recently the platinum: palladium ratio has risen to 1.90 and the latter’s price has disappointed. UBS’ analysts suggested yesterday that this was in part thanks to cooling expectations over a South African traded palladium ETF and a calming over the labour tensions in the country.