Gold Swings as Investors Wait for the Next Federal Reserve Meeting

This week saw a dip in gold prices, with a moderate recovery later in the week. It seems like everyone is waiting for the next Federal Open Market Committee meeting to take a steadfast position on what the yellow metal will do. The later part of the week saw news of upbeat U.S. retail sales, which helped the dollar. This news, in turn, lead to gold taking a 2 percent dip in prices, based on the fear that it could trigger the Fed to begin tapering the current economic stimulus program. The next FOMC meeting is set for December 17th and 18th, when the decision on whether or not to stay the course with the stimulus program will be decided.

The lull in prices on Thursday was followed by bargain hunters buying the low on Friday. Prices gained about $10 per ounce as investors rushed in to take advantage of the lower spot prices. Sentiments are still somber, however, since most experts believe that the looming Fed meeting next week may affect prices. David Meger, the director of metals trading at Vision Financial Markets said, “With the possibility of the budget debate behind us, it could bring to the forefront that the Fed is one step closer to tapering at its December meeting next week.”

Mark Luschini is the chief investment strategist for Janney Montgomery. He mentioned that since Congress is crafting a budget deal, it’s even more likely that the Fed will start tapering as soon as next week. “These things collectively are setting up the Fed to not have to defer to prospects of fiscal impasses and weak economic data,” said Montgomery.

Are things looking up for gold? Mark Dow, portfolio manager for hedge fund company Pharo Management, believes so. He recently told CNBC his thoughts: “It’s a really good time, risk-reward, to put in a long gold trade or a long sliver trade. You can see that the stops are nearby and you could get a bounce to 1400 or something along those lines or even more.”

If that wasn’t enough encouragement, Dow had this to say as well: “Even more encouraging, we’ve seen when the NFP report came out last week and was strongly positive – gold rallied. It didn’t fall off. Often the end of a trend is marked by news that would normally continue the trend, not continuing the trend.”

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Resources: Reuters, CNBC, CNBC2