Gold has traded between $1,148 and $1,166 so far today…as of 11:30 am Pacific, 30 minutes following a Fed rate hike, bullion is down $5 an ounce at $1,153…some knee-jerk selling following the Fed’s decision would not be surprising to help form the “hammer reversal” that Gold really needs…Silver is up a nickel at $16.93…Copper has added 2 pennies to $2.59…Nickel is up 2 cents at $5.16 while Zinc has rallied 5 cents to $1.27…Crude Oil has retreated $1.60 a barrel to $51.38 while the U.S. Dollar Index has jumped half a point to 101.52…
As widely expected, the Fed has raised interest rates for the first time this year and just the second time in more than a decade…the U.S. 2-Yr Treasury yield hit its highest level since August 2009 immediately after the Fed decision…
The Fed also indicated that it sees a brightening economic outlook and expects to raise short-term rates next year by another three-quarters of a percentage point, likely in 3 separate moves (of course last December they predicted 4 rate hikes in 2016)…
“The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2% inflation,” the rate-setting Federal Open Market Committee said in a statement…
Janet Yellen is currently conducting a news conference, her first since July, which will shed more light on her thinking for 2017…
HSBC sees potential for Indian Gold buying to pick up, and Commerzbank says a slump in the country’s Gold purchases already appears to be abating…Commerzbank analysts cite reports that Indian jewelry manufacturers have recoupled roughly half of the business they lost following the government’s demonetization. “It would appear that people are using cashless methods of payment, such as credit cards and online fund transfers, to buy Gold – in the country’s cities at least,” Commerzbank says (much of India’s Gold buying comes from rural areas). “In our opinion, it is doubtful whether this will immediately result in higher Gold imports given that jewelry manufacturers are still likely to have large quantities of Gold in stock following the high Gold imports in October and November and the collapse in Gold demand in recent weeks.”
HSBC, meanwhile, points out that India’s demand may be revived when new large denomination currency notes are made available…HSBC’s chief India economist, Pranjul Bhandari, points out that effective currency in circulation has fallen 60% since demonetization, implying a sizable ongoing cash crunch. “This is also crimping Gold demand and explains the slide in bullion imports in December,” says metal analyst Jim Steel. “But Ms. Bhandari also states that 80% of outstanding cancelled notes have made their way back to banks already, suggesting that the negative wealth shock may not be too high. This may be good for Gold demand later in 2017.”
Oil Update
Oil prices are under pressure today despite a larger-than-expected drop in inventories that helped offset some concerns over the ability of major players to cut production…the U.S. Energy Information Administration (EIA) reported a decrease of 2.6 million barrels in U.S. Crude stockpiles, higher than the 1.7 million barrels forecast on average by analysts and traders…
However, U.S. production surged by about 100,000 barrels a day last week, providing further evidence that American drillers are responding quickly to the higher prices that OPEC created by agreeing to curtail their own production…American drillers were not among the non-members who agreed to cut…in the lower 48 states, they drove production to nearly 8.8 million barrels a day in the week through December 9, according to the EIA…
In Today’s Morning Musings…
1. Cannabix Technologies’ (BLO, CSE) update…
2. Purepoint Uranium’s (PTU, TSX-V) Hook Lake JV boosts upcoming drill program to 30 holes…
3. Daniel’s Den – what’s up with Manitou Gold (MTU, TSX-V)?…
4. And more!…
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