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Was it another boring week for gold is this just the calm before the storm?
According to some commodity analysts, goldâs next trend will all come down to next weekâs Federal Reserve monetary policy announcement. While markets are expecting a 25 basis point hike, traders and investors will closely be watching what the Federal Reserve has to say about future monetary policy, mainly where they see the neutral interest rate.
With growing uncertainty surrounding the U.S. economy, many analysts think that the Fed canât be overly hawkish.
In a good news/bad news scenario, BMO analysts downgraded their outlook for gold and silver, but they added that they see the potential for the precious metal to rally once the Fed ends its rate hike cycle. Moreover, in this scenario next week is critical.
âAny change in Fed policy hinting to a pause in the hiking cycle, whether due to low [inflation] or weak domestic housing indicators, would likely see a relief rally for gold prices,â BMO said.
Of all the people I talk to, Ronald-Peter Stoeferle, fund manager at Incrementum AG probably had the best metaphor for the state of the U.S. economy; itâs not your typical sports comparison.
âWe are at the stage of the party where things are going to get euphoric, crazy and wild, that is when someone calls the cops and then the party comes to a crashing end.â
The fund manager, who is also one of the authorâs behind the annual In Gold We Trust Report also published an interesting report that looks at goldâs purchasing power in beer terms.
This Saturday is the start of Oktoberfest, the worldâs biggest beer festival. At current prices, one ounce of gold can buy 93 one-liter steins of beer, which is in line with historical averages. At the same time, the price of beer in euro terms continues to rise.
âThe steady loss of purchasing power of the euro is clearly visible, while gold has not lost purchasing power in the past seven decades, despite some fluctuations,â he said in the report.
While we wait to ponder the Fedâs next move, donât forget to check out Kitco Newsâ coverage of the Beaver Creek Precious Metals Summit and then the Denver Gold Forum. Check out our coverage on Twitter at [@KitcoNewsNOW](.
See you next week.
Neils
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For Pete's Sake
Peter Hug
Director, Global Trading
phug@kitco.com
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Jim Wyckoff
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jwyckoff@kitco.com
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