What to underpin Gold during August?

UNITED STATES August 02 2016 8:20 AM

NEW YORK (Scrap Register): INTL FCStone sees potential for gold to retest its July high in the month ahead, with the Federal Open Market Committee expected to refrain from any U.S. interest-rate hikes until the end of the year.

INTL FCStone does anticipate another hike beyond the 25 basis points from last December, but not right away. 

“The Fed will likely abstain from doing anything in September or October as that will likely be too soon to make a move,” INTL FCStone said in its monthly commodity outlook. 

A move in November is possible, but unlikely given that it is an election month. Most of the focus now seems to be on December and in this regard, the latest odds show a rate increase for that month at roughly 45%, while September is around 18%. 

A sidelined Fed between now and year-end should theoretically weaken the dollar and lead to some commodity complexes pushing higher, notably precious metals. 

In this regard and at least over the short term, INTL FCStone thinks that gold has a good chance of retesting its early July high of $1,377 this month, with an outside chance of possibly getting to $1,400. Silver may take a stab at $21.50 as its high. 

Meanwhile, INTL FCStone describes platinum and palladium as “overextended” after recent gains, calling for them to be range-bound in August.