Commodity Update; Gold – 24 March 2015
Gold rebounds as Federal Reserve revises economic projections lower
Since our last update concerns over Greece have become less pertinent than in the immediate aftermath of January’s elections while, for the most part, economic data in the UK, the US and Europe has remained largely positive.
This has diminished the need for catastrophe risk hedges among investors and gold has subsequently spent much of the last month under pressure, with the metal reaching a 2015 low at $1140.00 in the middle of March.
However, spot prices have recently rebounded towards the $1200 level in response to the Federal Reserve’s decision to revise downwards its economic projections for 2015. The renewed interest in the metal comes as, with lower projections for growth and inflation, investors are once again positioning for a “lower for longer” scenario when it comes to interest rates in the US.
We are unconvinced by the argument that lower projections will lead to a delay in the hiking cycle and in this regard, we note that the majority of forecasts still indicate that an initial move from the Fed is most likely before the end of September.
For this reason we believe that the recent sell off in the US dollar will probably be short-lived, while gold may also struggle to hold onto any further gains of note over the coming weeks.
Spot Gold / 8 Hour Intervals
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