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Rollercoaster week for gold as Fed speculation looms

The metal has been up-and-down all week as speculation surrounding a rise in interest rates just won’t go away
Gold bars and dollar bills
The precious metal is stuck in limbo at the moment

Gold was down in the final trading session of the week in what has been an up-and-down few days for the precious metal.

The precious metal has been stuck in limbo after the release of the Federal Open Market Committee’s minutes from its July meeting failed to clarify when policymakers would hike interest rates.

With uncertainty and speculation still looming, gold has been stuck as traders can’t decide whether to stick or twist.

One of RBC Wealth Management’s managing directors, George Gero said that “today, gold suffers from indecision.”

Neil Meader, an analyst at Metals Focus Ltd in London agreed, saying: “This period of consolidation we’ve seen is a reflection of the lack of clarity on when the next [rate] increase will occur.”

“The market remains very twitchy around anything that relates to the Fed,” Meader added.

Speculation has been around all summer that the Fed would raise interest rates given the improving outlook of the US economy.

Analysts had suggested that there was a small chance the Fed could hike rates back in July, although this didn’t materialise.

It is still widely thought that there will be at least one rise this year, although the Fed could hold off until after the US elections, an event which is sure to generate some degree of economic uncertainty.

Commodities are particularly sensitive to rate rises as it increases the opportunity cost of holding non-yielding assets such as bullion.

A rise would also serve to boost the US dollar, making greenback-denominated assets, like gold, more expensive to foreign currencies.

Although there has understandably been a lot of focus on the Fed in recent months, a hike in rates it doesn’t necessarily mean gold will plunge.

It is worth remembering that after last December’s much-anticipated rate rise, gold actually started to surge within a few weeks.

Good week for Orosur

South America-focused gold miner Orosur Mining Inc (LON:OMI, CVE:OMI) told investors this week that it is raising its production guidance for the current financial year (FY17).

It says it now expects to produce between 35,000 and 40,000 ounces of gold at operating cash costs of between US$800 and US$900 per ounce, up from previous guidance of 30,000 to 35,000 ounces at US$850-950 an ounce.

Orosur said it expects to benefit from the savings generated by the ongoing optimisation of operations as well as higher grades from the San Gregorio West Underground (UG) project in Uruguay.

Shortly before London close on Friday, gold was down US$7 to trade at US$1,345, slightly higher than last week’s closing price.

Silver fell 4c on Friday to US$19.35, while the price of platinum also dropped by US$16 to trade at US$1,111.


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