{"id":61786,"date":"2014-10-13T02:57:39","date_gmt":"2014-10-13T06:57:39","guid":{"rendered":"http:\/\/countingpips.com\/?p=61786"},"modified":"2014-10-13T07:18:39","modified_gmt":"2014-10-13T11:18:39","slug":"gold-enjoys-largest-gain-in-2-months","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/10\/gold-enjoys-largest-gain-in-2-months\/","title":{"rendered":"Gold Enjoys Largest Gain in 2 Months"},"content":{"rendered":"
October 13, 2014<\/div>
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By HY Markets Forex Blog<\/a><\/u><\/strong> <\/p>\n

Gold prices rose the most in two months on Oct. 6, as the U.S. dollar moved lower.<\/span><\/p>\n

December contracts for the precious metal increased 1.2 percent<\/a> to settle at $1,207.30 per ounce at 1:45 p.m. on the Comex division of the New York Mercantile Exchange, according to Bloomberg. This appreciation represented the largest one-day increase since Aug. 6. Alternatively, spot gold rose 1.4 percent to $1,207 an ounce<\/a>, after falling to a 15-month low of $1,183.46 per ounce, Reuters reported.\u00a0<\/span><\/span><\/p>\n

Dollar declines<\/span><\/span><\/h2>\n

The commodity’s price moved higher while the greenback declined as much as 0.9 percent relative to a basket holding 10 currencies, Bloomberg reported. This represents a break from the previous trend, as on Friday, Oct. 3, the U.S. dollar finished seven consecutive weeks of gains, its longest rally since June 2010.<\/span><\/p>\n

“The dollar drifting lower is adding support to gold,” Ole Hansen, who works for Saxo Bank A\/S in Copenhagen as the head of commodity strategy, told the news source. “Almost all of gold’s weakness we’ve seen has been a strong-dollar move.”<\/span><\/p>\n

The reserve currency has been moving higher at a time when government agencies and other sources of market data are consistently providing figures showing continued improvement in the U.S. economy. In addition, the Federal Reserve is almost done tapering, and many are speculating that it will soon increase its benchmark interest rates.<\/span><\/p>

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Fed stimulus waning<\/span><\/span><\/h2>\n

These two developments could easily impact the dollar’s value against other currencies. The Fed’s benchmark rates have remained near record lows for several years, which has placed downward pressure on borrowing costs.<\/span><\/p>\n

While interest rates remain low, owning gold has less of an opportunity cost, since the precious metal does not pay interest. However, once the financial institution starts bolstering its benchmark rates, gold’s situation will change.<\/span><\/p>\n

The central bank’s bond purchases could also impact the precious metal. The Fed spent several years buying bonds, pushing the total balance sheet of securities bought to more than $4 trillion. This stimulus increased the money supply, which could easily put downward pressure on the value of the greenback.<\/span><\/p>\n

Quantitative easing is scheduled to end later this month, and the Fed has not announced any new plans to stimulate the economy through bond purchases. With this stimulus dying down, the dollar might have an easier time enjoying further gains.<\/span><\/p>\n

The greenback and gold frequently have an inverse relationship. Most commodity contracts are dollar-denominated, so if the greenback falls in value, traders using other currencies can buy more of these raw materials than they could otherwise. Alternatively, if the dollar appreciates, market participants will not be able to get as much when purchasing commodity contracts using their native currencies.<\/span><\/p>\n

Commodities in general have strongly followed the dollar<\/a> for the majority of this year, according to The Wall Street Journal. Market participants have flocked to the reserve currency, motivated by speculation that the Fed will tighten monetary policy. However, these same expectations have made investors and traders less interested in gold.<\/span><\/p>\n

The precious metal has had a tough run in recent years, falling from more than $1,900 per ounce in late 2011 to less than $1,200 an ounce in 2013, a year where the commodity plunged nearly 30 percent. This recent difficulty contrasts with the strong rally gold enjoyed between December 2008 and June 2011, when it surged 70 percent in price. This sharp rise happened as central banks around the world made use of monetary stimulus.<\/span><\/p>\n

“Gold has held up relatively well compared to the other precious metals but, in our view, remains vulnerable,” Barclays Plc analysts, including Suki Cooper, wrote in a note, according to Bloomberg. The bank has predicted the Fed will start hiking its benchmark rates in June, “earlier than current market pricing of October 2015.”<\/span><\/p>\n

While these market experts made a prediction that might not bode well for gold, there are other developments that could help the commodity going forward. China’s financial markets were closed on Monday, Oct. 6, for a national holiday, Reuters reported.<\/span><\/p>\n

These markets will open once again on Wednesday, Oct. 8, according to the news source. Since the Asian nation’s industry participants were not involved in trading, the physical market did not have as much activity as it would otherwise.<\/span><\/p>\n

Market participants that trade gold could benefit from learning about the sharp increase the precious metal enjoyed on Oct. 6. Investors might also want to learn about the developments that surrounded this appreciation. Paying close attention to the future statements of Fed officials could prove invaluable, as it could grant insight into when the financial institution will start hiking its benchmark interest rates.<\/span><\/p>\n

The post Gold Enjoys Largest Gain in 2 Months<\/a> appeared first on | HY Markets Official blog<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

By HY Markets Forex Blog Gold prices rose the most in two months on Oct. 6, as the U.S. dollar moved lower. December contracts for the precious metal increased 1.2 percent to settle at $1,207.30 per ounce at 1:45 p.m. on the Comex division of the New York Mercantile Exchange, according to Bloomberg. This appreciation […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-61786","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/61786","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=61786"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/61786\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=61786"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=61786"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=61786"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}