Gold due for pullback
Published on 19.09.2017 16:41

The gold price has stabilized today after suffering 2 straight days of losses as the markets await a key Federal Reserve meeting in which the central bank is going to lay out its monetary policy strategy moving forward.

Investors expect the Fed will announce they will begin reducing the 3.7 trillion asset base which was built up because of the global financial crisis in 2008 to spur economic growth.

"Normally you would expect gold to suffer from a reduction of the balance sheet, as it benefited when it was increased," said Simona Gambarini,  an analyst from Capital Economics.

"But as the Fed has been quite open about its intentions to make this happen, I don't think, unless it announces that it intends to reduce by a lot more than markets expect, that will happen." She added.

Gold has benefited immensely over the last few weeks on the back of heightened tensions between the US and North Korea over the latter’s missile program but for the time being it seems things have cooled down which may leave investors exiting gold for higher growth assets,

“With no increased provocation to speak of on the Korean Peninsula, investors are moving out of gold, the yen and U.S.Treasury’s in search for higher-yielding, more-risky assets,” said Richard Perry, market analyst at Hantec Markets.

“This move means that the technical positions on gold and the yen are on the brink of a significant change in outlook.” He added.

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Andrew Masters

Analyst

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