Gold futures weekly recap, September 15 – September 19

Gold futures edged lower this week, after the Fed raised the projected central lending rate by end of 2015, spurring a rally for the dollar, weighing heavily on the precious metal.

Gold futures for delivery in December dropped 0.84% on Friday, closing at $1 216.6 per troy ounce, ~1.3% down for the week. Weekly high and low were at, respectively, $1 243.2 on Tuesday and $1 214.2 per ounce on Friday, which was also a nine-month bottom. The contract dropped ~2.8% last week.

The highly anticipated Federal Open Market Committee (FOMC) September meeting took place this week, with rate and quantitative easing decisions announced yesterday.

The monetary-policy body of the Fed decided to, as expected, cut monthly assets purchases by another $10bn, steering the QE program to an October close, and keep the benchmark interest rate at 0.25%. The Fed’s projection for next year was changed, however, with still a “considerable time” between the QE program closing and rates rising. The end-year rate target, however, was raised to 1.375% from the previous of 1.125%, offering dollar bulls significant support.

The US Dollar Index, which measures the strength of the greenback, reached a 4-year peak this week, weighing on all dollar-denominated commodities, such as gold.

Investors also priced in a reported “No” result of the Scottish independence referendum, calming fears of break up of the UK, the world’s sixth largest economy. The preliminary results show a 54% of Scots voted against independence.

The news was perceived as bearish for gold, as it dimmed demand for a safe haven with the unity of the UK secured.

Logging the drop in confidence for gold, the SPDR Gold Trust, the largest exchange-traded gold-backed fund, trimmed assets by 4 tons to 784.22 tons, the lowest in three months.

Economic data

The US dollar also priced in a fair amount of economic data this week. US benchmark CPI at the disappointing 1.7% on an annual basis and -0.2% month-on-month in August, while core CPI, which excludes the more volatile food and energy, was reported at 1.7% from a year ago.

Yesterday, however, initial jobless claims were logged at 280 000, the lowest weekly level in six years, while housing starts plummeted and building permits were also below-par.

Meanwhile, Eurozone CPI readings for August were also logged today, with benchmark consumer inflation at the disappointing 0.4% annual rate. These figures are the last inflation figures to cover a period before the European Central Bank (ECB) reduced the central lending rate to the historic low of 0.05% and announced a €3tn QE program at its September meeting. The positives of ECB’s intervention will not be visible until the next CPI readings.

Weak economic data out of the Eurozone weighs on the euro, which is the US dollar’s main competitor, and as such, any weakness in the euro translates into a stronger dollar, which in turn weighs on gold.

Next week

Next week will offer plenty of data for traders to gauge demand and growth outlooks in top economies.

The US will report on GDP, durable goods orders, and will post a bunch of housing data. Meanwhile, the Eurozone will also see services and manufacturing PMI figures, as well as a couple of economic sentiment gauges.