Commodity Blog

Commodity news, technical and fundamental analysis, market data on precious metals, energies, industrial metals, and soft commodities


Gold Suffers Second Day of Losses amid ECB Move

September 8, 2016 at 17:39 by Andrew Moran

After starting the week off strong, gold is suffering the second straight day of losses. The yellow metal experienced a decline on Thursday from a rising dollar and global monetary policy. Gold investors will be waiting to see what the Federal Reserve does later this month when it comes to interest rates.

December gold futures tumbled $8.20, or 0.61%, to $1,341.00 per ounce at 17:10 GMT. Gold had traded in positive territory to initiate the trading session, but immediately retreated after the European Central Bank (ECB) confirmed it would be leaving interest rates unchanged at historic lows.

Silver suffered the same fate on Thursday. December silver futures dipped $0.18, or 0.95%, to $19.66 an ounce. Silver crossed the closely watched $20 mark late Tuesday before paring those large gains. Silver has been Water Bounce Houses unable to maintain any sort of momentum over the past month. Silver lost 8% of its value in August.

The ECB left the main lending rate at 0%, the rate paid on deposits left overnight at negative 0.4%, and the marginal lending facility at 0.25%. ECB President Mario Draghi told reporters that the central bank will leave rates low for an “extended period.” He added that the ECB will continue its monthly asset purchases until at least the end of March 2017.

When it comes to the US central bank, a September rate hike has become more uncertain. Since Fed officials met in Wyoming for the central bank’s annual summer retreat, there has been a plethora of negative US economic data.

Last month’s jobs numbers came in lower than expected, the ISM manufacturing survey fell to under 50, the ISM non-manufacturing survey contracted to 51.4, and housing is beginning to slow down. Also, the gross domestic product (GDP) has been very weak so far this year.

Next week, August retail sales, regional Fed surveys, the consumer price index (CPI), and the producer price index (PPI) will be released.

All of these negative data points could prompt the Federal Open Market Committee (FOMC) to delay a rate hike during the September 20–21 meeting. The CME Group FedWatch tool pegs the odds of a rate hike at 24%. This figure has dramatically declined from last week’s 40%.

In a rising-rate environment, gold’s glitter fade because it does not offer investors any yield. When rates go up, the opportunity costs diminish and traders seek out riskier investment vehicles. A go-slow Fed, meanwhile, would be a positive for gold bugs.

If you have any questions and comments on the commodities today, use the form below to reply.

Leave a Reply