Gold Has To Wait For June Fed Meeting Before Breaking $1,300: Analyst

By Paul Ploumis (ScrapMonster Author)

May 06, 2016 01:03:32 AM

(Kitco News) - Friday’s nonfarm payrolls report might not might not have much impact on gold prices in the near-term as markets awaiting June’s Federal Open Market Committee Meeting, according to one market analyst.

Although markets aren’t expecting the Federal Reserve to raise interest rates at its next meeting, Colin Cieszynski, senior market analyst at CMC Markets, said they might not have a choice as they are running out of time.

According the CME Group’s 30-Day Fed Fund futures prices, markets are pricing in only an 11% chance of a 0.25% basis point hike in June; however, Cieszynski said that markets are probably being too pessimistic.

“If they are serious about two rate hikes this year then they have to move in June because of the presidential election,” he said. “Considering how contentious this election is going to be, the Fed is probably going to keep very quiet, hoping nobody will notice.”

If the U.S. central bank doesn’t move in June, then Cieszynski said he would expect gold prices to see a significant rally since all rate hikes would be taken off the table at that point.

However, until the meeting, he said that he expects gold prices to remain range bound, trading between support at $1,250 and resistance at $1,300.

Looking in the near-term, Cieszynski said that he could see gold prices eventually test support and could even fall to $1,200 as gold enters a seasonally slow period. But, even at lower prices, the metal’s new bull market is not at risk of failing.

“I’m still bullish on gold but I think we are going to see a period of consolidation in the near-tem,” he said. “Gold’s 100-day moving average is around $1,180 and its 200-day moving average is around $1,150 so there is still a lot of room for the market.”

If the Fed does raise interest rates twice – in line with their March expectations – Cieszynski said he wouldn’t see much long-term downside for the yellow metal as price-pressure inflation expectations are rising and the central bank will be behind the curve.

Courtesy: Kitco News