Gold Prices Haunted By The Federal Reserve

The “will they won’t they” hike rates in the US casts a shadow over gold prices and hampers gold’s ability to gain any traction. The recent FOMC meeting has hinted once again that a rate hike is possible in December…and so the prospect of a stronger US Dollar puts downward pressure on gold in dollar terms.

This mantra of we are going to raise rates has been going on for over a year by the FOMC. And now we are down to the last month of the year when such a move can be accommodated. If however, the data regarding employment and inflation does not hit the Feds targets…and they decide to delay once again, until next year, then their credibility will be shot.

We have for a long time expected a final capitulation in the precious metals sector and a rate hike could be the catalyst for such a move. If the Feds targets are reached and they do pull the trigger on a rate increase then gold and silver will plunge in dramatic fashion. This could be the final clear out that this sector needs in order to start again and build a solid base from which to form the next bull market. Those who can keep their powder dry until such an opportunity presents itself should do very well indeed.

Taking a quick look at the chart, we can see that gold has rolled over and is now heading south with the possibility of a re-test of the $1080/oz level in the frame. And if that fails to hold, then the sell-off could be severe.

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