Gold and Silver rallies capped over interest rate fears
Bullion.Directory precious metals analysis 10 September, 2014
By Christopher Lemieux
Senior FX and Commodities Analyst at FX Analytics
Precious metals remain to the downside, as market participants continue to brace for a potential interest rate increase from the Federal Reserve.
The hype around the first increase in the Fed funds rate since 2008 has capped any rallies in gold or silver.
If interest rates do rise in early-to-mid-2015, which is unlikely given central banking’s track record, investors will begin to move towards interest rate bearing investments and away from those that do not pay one to hold them.
The US dollar index has hit a new 14-month high ahead of unemployment claims and retail sales later in the week. “The dollar strength is certainly playing into the weakness of commodities across the board” said Wayne Gordon, commodity analyst at UBS-Singapore.
The increase in the dollar has made precious metals more expensive in terms of foreign currencies.
Net-shorts jumped 44 percent on gold, according to data from the Commodity Futures Trading Commission (CFTC). Net-longs contracts 20 percent to 74,031 futures and options, the lowest level since mid-June.
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