Outlook of Gold with Today’s FOMC Policy MeetingBy Annie Reona | Wednesday, July 29th, 2015
As traders and financial experts wait in anticipation for the results of the FOMC policy meeting that are to be released today, July 29, 2015 at 2 PM ET, the gold outlook continues to look grim for many investors. Last Friday, gold was the lowest it has been in the last 5 ½ years, and it has been continually dropping over the last 5 weeks.
Janet Yellen, the Federal Chairwoman, made a statement to the US Congress earlier in the month which she repeated more recently to address the continued weakness present in the US labor market. She did then express her confidence that as the US economy continues to grow, the US labor market will also continue to grow. Yellen also reported that for the first time in almost 10 years, the central bank is on track and is expected to hike.
There are several factors that are causing the decline of gold. One is due to the submission of Greece to the demands of their creditors to provide a third bailout in exchange for reforms. The other primary factor is the decline in the physical demand for gold, particularly to China. The net Chinese imports have been steadily decreasing over the last several months, reaching a 10-month low last June. This decrease of demand in gold has fallen below the expectations of analysts.
The decline in gold has further led to a decline in assets in gold-backed ETFs over the last 3 months. These assets which reached a high in December 2012 have been reduced to nearly half as of Tuesday, July 2015. These are the lowest number of assets that are being seen since September of 2008. Experts believe that one of the things that is keeping the gold market afloat is the strength of the US dollar.
The US dollar has continued to gain strength against other currencies in the current market, allowing dollar-denominated commodities to remain in good positions. In the area of durable goods, the orders in June exceeded projections made in May as the US sector of services did the same. The consumer confidence level had a big blow as home prices in many of the major US cities did not grow as expected, but data shows that there will still be an increase in home sales in the month of June.
While those who trade gold and other commodities will suffer in the bearish market that is being seen with this decrease in the price of gold, binary options traders can still make a profit in a down market. Binary options traders can expect to continue to profit so long as they keep an eye on the gold market and watch for indications that gold could make a comeback, but early speculation by analysts indicates that this is not likely to happen anytime soon.Published in News & Analysis