It’s a big big day for precious metal traders as the Federal Reserve makes their decision on tapering monthly asset purchases. Most speculators believe that the FOMC will announce an additional tapering $10 billion monthly. Markets have priced in this decision but there is a strong possibility that the Fed’s may offer a larger tapering. A minor consensus is a total tapering of $25 billion. With the Fed’s limited mandated scope of full employment and inflation or price control other aspects of the recovery do not carry much weight. Earlier in the month the nonfarm payroll pointed to a drop in new jobs creation as unemployment tumbled much lower than expected holding at 6.7%. This might force the Fed’s to take more aggressive action than the markets are expecting. Gold is trading at 1253.20 up by $2.70 in the Asian session while silver gained 84 points to trade at 19.587. Platinum has gained $1.60 to reach 1411.85. These gains are surprising as the US dollar also gained in the morning session adding 10 points to trade at 80.74.
With Argentina and Turkey taking measures to control the devaluation of their currency and rebound in equities, the yellow metal is certainly under pressure. In India, the Reserve Bank of India’s move to raise key interest rates will draw investments, strengthening the rupee. Buying of physical gold in Asia could slow ahead of the Chinese holidays and due to buyers’ unease to pay higher prices. Chinese demand is a far more important determinant of gold prices going forward than QE tapering by the Federal Reserve. Just look at other markets. Last year China overtook France as the world’s biggest consumer of red wine. Think what that has meant for wine prices over the past decade. First growths went to being affordable by the Western middle classes to being for the one-per cent only. Holdings in SPDR Trust, the world’s biggest exchange-traded fund, were unchanged at 790.46 tons.
Industrial metals hit a seven-week low on Tuesday as buying interest faded ahead of the Chinese New Year and as a stronger dollar weighed, though a steadier tone in emerging markets helped limit the metal’s losses. Copper closed down 6 points at 3.253 yesterday and recovered this morning in the Asian session adding 12 points to trade at 3.263. Prices closed nearer the session low and hit another six-week low today. Copper bears have the overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at last week’s high of 3.358. Copper prices moved in a range to lower for the day as investors await FOMC meet. Turkey’s central bank stunned investors with a huge hike in interest rates on Wednesday stirring hopes the drastic action would short-circuit a vicious cycle of selling in emerging markets. Investors also worried over slowing Chinese economy and its impact on other emerging markets.