Gold prices rose on Thursday, on a short-covering and bargain-hunting bounce after prices dropped to a 5.5-year low Wednesday.
Comex gold for December delivery last traded at $1,082.10, up 1.24%, while December Comex silver was last seen at $14.305 an ounce, up 1.63%.
Market players are still discussing the minutes of the last Federal Reserve Open Market Committee (FOMC) meeting, which showed that the committee members agreed U.S. economic conditions are now in place for an interest rate increase in December.
Gold prices saw a rebound and U.S. stock indexes extended gains in a classic "sell the rumor, buy the fact" scenario, after so much market worries in recent weeks and months over when the Fed will make its first interest rate rise in nine years.
One dovish element in the FOMC minutes was the reference that any future U.S. interest rate increases will be gradual. Many market observers had already believed the Fed will increse interest rates by 0.25% in December and Wednesday’s FOMC minutes bolstered this view. Most market participants will be glad when the rate hike finally happens, to remove the uncertainty of the matter and so the general discourse of trading and markets can focus on something else.
With gold’s decline to a 5.5-year low Wednesday, fresh longer-term chart damage was inflicted to suggest a challenge of the $1,000.00 level in the coming weeks or few months. However, from a longer-term perspective, looking out over the horizon in the coming years, Jim Wyckoff from Kitco News reiterates: gold, silver and many other markets’ prices at present low levels do present a longer-term "value-buying" potential for investors. He is referring to the "buy and hold" investors, rather than the shorter-term to intermediate-term traders.
He writes that he is confident that gold prices will touch a new record high in the coming years, and possibly sooner than most would ever imagine. If you examine the charts, markets’ price history shows that raw commodities experience cycles of boom and bust are well-defined. The present bust cycle in the raw commodity sector, Wyckoff says, is very mature and will possibly end sometime next year. The fact that so many market observers are now very bearish raw commodities is another clue that the bottom of the bust cycle is not far off.
In other news, China’s central bank reduced its interest rate on its standing lending facility to 2.75% on an overnight basis and to 3.25% on a seven-day basis. The move was not considered a major monetary policy action, but highlights the People’s Bank of China’s incline toward further monetary stimulus.
Credit: mql5.com
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