Gold And The Perils Of Uncertainty

www.investing.com/analysis/gold-and-the-perils-of-uncertainty-200157442

By AvaTrade | Oct 06, 2016 08:58AM ET

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Gold prices plummeted on Tuesday, decreasing 3.3%, breaking a key support level of $1300. A sell-off so considerable hasn’t been seen since the summer of 2015 and much speculation has circulated around the cause of the slump. The commodity has historically been a safe-haven in times of uncertainty as investors seek to increase exposure in commodities and bonds. So why, with such volatility in the market at present, have investors moved away from Gold?

Analysts have suggested that the United States rate decision is central to the commodity’s decline. The Federal Reserve have hinted that an increase in interest rates is imminent. The Fed’s intent is starting to bolster investor confidence in the US Dollar. The inverse relationship between the USD and Gold are apparent; while USD increases, Gold decreases. It may be a prediction of what is to come in December, the market may be getting ready for an interest rate hike.

Speculation in the market around the European Central Bank (ECB) may also have had an apparent effect on the sell-off of the metal. The ECB have hinted they will slow down on their purchase of bonds. The decrease in purchase of bonds may be the first step in ending Quantitative Easing in Europe. President of the European Central Bank Mario Draghi has repeatedly suggested that Quantitative Easing will start to come to an end in 2017.

Gold prices could continue to be volatile in the final months of 2016, we may see the precious metal’s price quickly increase; uncertainty will increase as the November United States Presidential Election nears. Furthermore, if Janet Yellen and her colleagues decide to hold off on a rate hike until 2017, the result could be a rise in gold and decline in the valuation of the US Dollar. As Europe approach a post- Brexit economy, contagion has spread and uncertainty over Europe’s future is on every investor’s mind. Gold may be a welcome shelter in a storm of unpredictability.

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Central Banks

Interest Rates

Next Meeting

FED

5.50%

Nov 01, 2023

ECB

4.50%

Oct 26, 2023

BOE

5.25%

Nov 02, 2023

SNB

1.75%

Dec 14, 2023

RBA

4.10%

Oct 03, 2023

BOC

5.00%

Oct 25, 2023

RBNZ

5.50%

Oct 04, 2023

BOJ

-0.10%

Oct 31, 2023

CBR

13.00%

Oct 27, 2023

RBI

6.50%

Oct 06, 2023

PBOC

3.45%

BCB

12.75%

Nov 01, 2023

US 30	32,949.3	-484.1	-1.45%
US 500	4,221.5	-66.9	-1.56%
Dow Jones	32,945.78	-487.57	-1.46%
S&P 500	4,221.47	-66.92	-1.56%
Nasdaq	13,040.61	-267.16	-2.01%
S&P 500 VIX	20.38	+2.77	+15.73%
Dollar Index	106.792	+0.186	+0.17%

Crude Oil WTI	89.34	+0.52	+0.59%
Brent Oil	91.00	+0.29	+0.32%
Natural Gas	2.952	+0.112	+3.94%
Gold	1,839.90	-7.30	-0.40%
Silver	21.360	-0.061	-0.28%
Copper	3.6147	-0.0268	-0.74%
US Soybeans	1,274.50	-2.50	-0.20%

U.S. 10Y	4.808	+0.121	+2.59%
U.S. 30Y	4.942	+0.146	+3.04%
U.S. 5Y	4.801	+0.084	+1.78%
U.S. 3M	5.509	+0.023	+0.42%
US 10Y T-Note	106.70	-0.62	-0.58%
Euro Bund	127.14	-0.58	-0.45%
10-2 Yield Spread	-42.56	+4.90	+-10.32%

Apple	171.93	-1.82	-1.05%
Alphabet A	132.51	-1.66	-1.24%
Tesla	246.63	-4.97	-1.98%
Amazon.com	124.75	-4.71	-3.64%
Netflix	374.55	-5.78	-1.52%
Meta Platforms	301.60	-5.22	-1.70%
Bank of America	25.98	-0.72	-2.70%

Gold And The Perils Of Uncertainty

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