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Gold's September Target Is In, And It's Much Higher Than Today's Price - INTL FCStone

 

 (Kitco News) - As the Federal Reserve’s December rate hike is looking less likely, gold’s prospects are rising. And this has one commodities analyst eying a much higher price target for both gold and silver in September.

“We see gold making a possible stab to $1,390 this month, with silver moving up to $18.60,” said INTL FCStone analyst Edward Meir in a report Monday.

Gold’s solid performance has “impressed” Meir, who wrote that because gold took out “the stubborn triple-top resistance at $1,300 decisively,” the precious metal will now be seeing “more chart-oriented money [joining] in on the long side.”

One of the key drivers for gold this month will be the Fed and the market’s perception of its dovish tone on future rate hikes.

 “Macro variables are lessening the odds of a December rate hike,” Meir wrote.

Indeed, the U.S. economy created fewer jobs than markets were expecting in August, with the Bureau of Labor Statistics saying on Friday that only 156,000 jobs were added, which fell short of market consensus of 180,000. 

Also, the Fed's preferred inflation measure – the personal consumption expenditures (PCE) price index that excludes food and energy – advanced only 0.9% in Q2, marking the slowest pace in more than two years. 

“Both the ECB [European Central Bank] and the Fed have expressed disappointment with subdued inflation readings and markets are sensing that their disappointment will be used as an excuse to delay further rate moves or tightening measures, fostering a favorable backdrop for gold,” Meir pointed out.

On Tuesday, Fed Governor Lael Brainard warned that U.S. inflation is “well short” of the central bank’s target and the Fed should be “cautious” about hiking rates further until it is confident “inflation is on track to achieve [its] target.” 

Markets’ rate hike expectations for December are already pretty low, standing at about 30-35%, Meir said, noting that devastation from Hurricane Harvey is likely to weigh them down even further by putting a dent on Q3 GDP data.

While markets place bets on rate hike probabilities, there are other factors also working in the metal’s favor. North Korean tensions will provide short-term support for gold in September, according to Meir.

The steadily weaker U.S. dollar has been helping to boost gold prices further, mainly driven by escalating tensions with North Korea, the analyst said. “The North Koreans have continued to dare the U.S., firing yet another missile over Japan and eliciting a South Korea/U.S./Japanese flyover in response.”

The developing situation is triggering a fresh selloff in the dollar and benefitting gold, Meir added.

By Anna Golubova

For Kitco News

Contact agolubova@kitco.com

www.kitco.com

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