Gold prices are moving lower today in relatively quiet trade as the market continues to retreat. Stocks are slightly lower today while crude oil is flat and the dollar index loses ground.
The gold market is attempting to stabilize following selling pressure seen since the FOMC announcement this week. While the central bank did not make any changes to policy this month, the Fed did leave the door open to a hike in December — and some might say the central bank left the door “wide open.”
Of particular note was some language added to the Fed’s statement. Overall, the statement appeared to be on the hawkish side of the ledger and it sounds as if the Fed may be preparing markets for a rate hike in December. While the central bank has maintained that it would likely hike rates before the end of the year, recent economic weakness and volatile Chinese markets have kept investors guessing as to whether or not the Fed would in fact take action. While Chinese markets have calmed down significantly, concerns still remain about the health of the world’s second largest economy.
Another issue that the Fed may consider is the ongoing willingness of the ECB to pump more money into the region’s economy. The euro saw a significant slide recently following commentary by ECB President Mario Draghi that could be indicative of further stimulus measures to come.
The Bank of Japan has also hinted that it could initiate further stimulus measures as it lowered its growth an inflation forecasts. This is also likely to be taken into consideration by the Fed.
The gold market has pulled back into its previous trading range in what could be considered a false upside breakout. The question now may become whether or not g0ld makes a higher low. Interest in gold may potentially dwindle for now as investors play the waiting game and look for more clues on interest rates.
Stocks have recovered from large losses seen in late August and could potentially head back for another run at all-time-highs. Of course, if the Fed does, in fact, hike rates, the market could potentially change direction in a hurry. For now, however, risk appetite appears to be quite healthy and investors may shy away from perceived safe-haven assets, such as gold, in favor of stocks and other risk assets. For now, the path of least resistance in gold appears to once again be lower.
