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Gold Maintains a Narrow Trading Range

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Oct. 28 2015, Published 1:19 p.m. ET

Precious metals fall

Since investors are likely expecting a dovish stance from the FOMC’s (Federal Reserve Open Market Committee) policy-setting meeting, gold maintained a narrow trading range on the first day of the meeting. Gold futures on COMEX, a commodity division of NYMEX, fell 0.03% and closed at $1,165.80 per ounce on Tuesday. It traded in the range of $1,160.50–$1,168.80 per ounce. Silver futures prices also fell 0.26%. They settled at $15.80 per ounce. Platinum and palladium fell 0.83% and 0.75%, respectively, on Tuesday, October 27, 2015.

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Gold demand rises

Although the bullions witnessed a fall in prices on a YTD (year-to-date) basis, the central banks are buying more. Gold demand saw a rise of ~7% in 3Q15. However, the markets are still in a surplus of 51 tonnes. Retail investments also saw a rise in the top consumer countries like India, China, and Germany. These three countries witnessed a rise in demand of 30%, 26%, and 19%, respectively. Central banks are expected to become net buyers of gold for the sixth consecutive year. The exceptional fall in prices during July could be a crucial element that helps the growth in demand.

Bullion prices rose after the FOMC declared a delay in the liftoff in September. This could happen again after the policy-setting meeting in October. Once the markets price the Fed’s decision, industry experts suggest a downfall in gold. If gold bottoms, gold-backed ETFs like the SPDR Gold Shares (GLD) and the iShares Gold Trust (IAU) could see a fall in their prices. Mining companies like Coeur Mining (CDE), Barrick Gold (ABX), and AngloGold Ashanti (AU) could also experience a similar fall. These three companies account for 11.8% of the VanEck Vectors Gold Miners ETF (GDX).

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