Gold Price In Euro Terms Looks More Promising With A Strong USD
New York (Nov 22) According to one market analyst it could be only a matter of time before gold prices fall below $1,200 an ounce as the Federal Reserve prepares to raise interest rates in two weeks.
In an interview with Kitco News, Phillip Streible, senior market analyst at RJOFutures said that although the near-term outlook for gold does not look great, there are other opportunities in the gold market.
“One trade that some are doing well with is going long gold and short euro,” he said.
Tuesday, Kitco.com gold currency charts showed that the yellow metal is performing slightly better against the U.S. dollar compared to the euro; however, year to date gold is higher against the euro.
Gold in U.S. dollar terms last traded at $1,212 an ounce, down 0.14% on the day; at the same time gold in euro terms traded at €1,140.01, down 0.30% on the day. However, gold in euros terms is up 16% since the start of the year, compared to 14% gains against the U.S. dollar during the same period.
According to Phillip Streible, senior market analyst at RJOFutures said that gold in euro terms has more potential compared to the U.S. dollar
Streible said that gold in euro terms could continue to have more potential than its U.S. dollar counterpart because of interest divergence. While the U.S. central bank is expected to raise interest rates by 25 basis points at Dec. 14 monetary policy meeting, the European Central Bank is expected to remain extremely accommodative.
Monday, in his testimony before the European Parliament, ECB President Mario Draghi said that the central bank is committed to preserving its “substantial” accommodative monetary policy to boost inflation close to its 2% target.
“The return of inflation towards our objective still relies on the continuation of the current, unprecedented level of monetary support, in spite of the gradual closing of the output gap,” he said in his prepared remarks.
Looking at the U.S. market, Streible said that he could see gold falling to $1,150 an ounce following the December rate hike, but this level could represent a buying opportunity.
“Gold’s biggest headwind remains the U.S. dollar for now,” he said. “If the Fed isn’t as aggressive in their interest rate hikes as economists are expecting then you could expect gold prices to rise and the U.S. dollar to fall.”
CME 30-Day Fed Fund futures are pricing in at 94% chance of a rate hike in December. However, markets are only pricing in a 40% chance that the Fed move again next year.
Source: KitcoNews
