Weekly Commodities Wrap: Schroders Forecasts Sub $50 Iron

Gold: December US Rate Hike Expectations Weigh On Gold

The yellow metal came under pressure this week as fresh comments from Fed members encouraged expectations of a December rate hike. Philadelphia Fed President Harker said that the Fed should “prudently move up to the neutral real rate as quickly as possible” noting that “very little slack” remains in the US labor market. New York Fed President Dudley also backs quickly moving back to the neutral rate noting that “pressure on resources will drive wages up over time”.

Gold had rebounded last week following the release of the FOMC minutes which highlighted the Fed’s concern over low inflation. However, following last week’s release of a strong headline CPI print for September, USD bulls are now strongly expecting a rate increase in December with the CME group forecasting tool pricing in a 92% chance of a .25% hike.

After challenging the 1296.13 level last week, which was key resistance over the summer, the price has since reversed lower. The next key support level will be a test of the rising channel base with the structural low at 1204.89 (July low) the next key level.

Silver: Rally Stalls As Speculators Take Profit

Silver prices were broadly unchanged this week. Despite some upside over the week prices fell back into the second half of the week due to profit taking from speculators and weaker global cues. Momentum has stalled in Silver over the last two weeks linked to conflicting views on the Fed. Last week’ FOMC minutes seemed to point to a weaker chance of a Fed rate hike while the recent CPI print and this week’s Fed comments have bolstered expectations of a December rate hike.

Silver continues to move within a large contracting triangle pattern. After failing at the 17.4819 level, the price has since turned lower and is now just above rising trend line support from last year’s lows. Below there, the next key level will be the October low around 16.3136.