Gold Price Volatility encourages Wait and See Approach

Wednesday June 17th 2015.

Hi all, Gold had another wait and see week, treading water around US$1182 per oz. awaiting news on another Greek deadline due this Thursday. Today also marks the beginning of the FOMC’s two day meeting. The US central bank isn’t expected to raise interest rates, however many in the market are now factoring in a likely increase later in the year, with most punters picking September. Speculation has therefore favoured the USD, edging higher, and in turn weighing on commodities and commodity currencies such as the Kiwi. The good news for Gold traders is that the Kiwi has fallen faster and further than Gold and Silver, pushing up Bullion prices in NZ terms.

In uncertain times you can be sure of one thing… volatility!. With talks having stalled ahead of the technical deadline for an agreement on Thursday, the likelihood of a deal being reached is now almost non-existent.  The Euro group finance ministers meeting is still scheduled to decide the “fate” of Greece, but there have been so many of these meetings it is hard to see this one producing anything concrete. It also looks like the market has become complacent, anticipating another last minute deal to be reached, so hence traders aren’t jumping into Gold… yet.

While Gold has had the benefit of safe haven support, the rest of the precious metal complex have struggled. Platinum and Palladium both are being dragged lower by a risk off sentiment swirling around the stock markets. Already this month Palladium has lost 6% to now trade at US$1,080 per ounce and Platinum has dropped approximately 3% to $732.45 per ounce.

I’m not a betting man, but I can’t see the benefits of selling precious metals at current levels, especially this close to major technical support and with such large event risk looming.  Buying Call options appears best strategy ahead of tomorrow’s announcements.

By Adam Van Sambeek, Treasury Manager.

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