Gold pare gains after hawkish Fed comment

The gold price initially climbed to a two-week high of $1,183 per troy ounce yesterday, though it came under considerable pressure in the evening and fell back to a good $1,150 overnight. 

The slide in the prices of gold and silver was triggered by an unexpectedly hawkish accompanying statement from the US Federal Reserve and a much firmer US dollar as a result. It appreciated by nearly two US cents against the euro. 

The Fed prepared the markets for a rate hike in December. It appears to be less worried about the global economic turmoil, as the situation on the emerging markets has after all calmed. 

Moreover, it now talks of "whether it will be appropriate to raise the target range (for the federal funds rate) at the next meeting". According to the Fed Fund Futures, the probability of this happening has risen to just shy of 50%. 

In recent days, citing the high net long positions held by speculative financial investors are warned against, that the prices of gold and silver would likely come under pressure if the Fed were to signal an imminent rate hike. Some of these net long positions are now likely to have been covered. 

"The gold price in euro terms, on the other hand, is holding its own at €1,060 per troy ounce. Given the prospect of the ECB expanding or extending its QE programme in December, the gold price in euro terms should be able to defy the upcoming interest rate reversal in the US", says Commerzbank.