Gold and silver prices have had another solid week, with the precious metals trading above USD $1230 and USD $15 per troy ounce respectively.

In Australian dollar terms, the metals are also trading strongly, sitting above AUD $1630 and $20 per troy ounce, consolidating the impressive returns in Q1 that saw the metal rise 17% in USD terms.

Precious metals have closed out a very impressive Q1 2016, a welcome respite after what has been a tough three years for those who’ve been long in the sector. After starting the year trading at USD $1,060 and USD $13.85 per troy ounce for gold and silver respectively, the market has rallied strongly, with the two metals finishing the quarter up 16% (gold) and 11% (silver). That is based on closing prices of USD $1234 and USD $15.38 per troy ounce for the two metals.

Gold prices corrected sharply overnight, with the price of the yellow metal falling as low as USD $1214 per ounce, with silver following suit, trading as low as USD $15.13 per ounce before stabilizing somewhat.

Prices for Australian dollar investors have also pulled back, with the local currency still stubbornly sitting above $0.75 per ounce. AUD gold is currently trading at $1620 per ounce, whilst silver is sitting at AUD $20.40, an area that has proved very good buying for most of the last year.

The price decline we’ve seen overnight has not come as a huge surprise, with a pullback expected for much of the past two to three weeks. Speculative and commercial positioning in the futures markets had suggesting precious metals were short-term overbought, and this kind of weakness is often a good thing, setting the market up for another move higher.

We will take a more detailed technical look at where the market sits today, after this pullback, and where the key support lines are late on in this report.

Gold prices have consolidated this week, originally pulling back before the very dovish projections from the Fed put some wind under the sails of precious metal prices.

In USD, gold is currently trading at $1259 per ounce, essentially unchanged for the week, whilst silver is sitting at $16 per ounce, up nearly 3% for the week. Prices in Australian dollars have corrected, owing to the quite extraordinary rally in the local currency, which has pushed above 76 cents vs. the US dollar.

AUD gold and silver are now trading just below $1650 and $21 per ounce respectively, a pullback that is all currency related, rather than due to any actual precious metal price weakness.

If they closed the books on 2016 tomorrow – precious metal investors would be celebrating a very happy year indeed. After ending 2015 as the most hated asset class on the planet, gold has trumped all over the last several weeks, currently trading north of USD $1250 and AUD $1700 per ounce.

The price in Australian dollars, up nearly 20% for the year, is even more extraordinary when one considers where the local currency is, with the Australian dollar sitting at $0.74 vs. the US dollar, testament to better than expected GDP figures down under, a bounce in iron ore, and the realization the Fed’s forecasts for stronger growth and higher rates in the United States were as inaccurate heading into 2016 as they were heading into 2008.

The performance of gold over this period has seen huge inflows into gold ETFs, strong retail demand (ABC Bullion turnover is particularly brisk right now), and an incredible change in speculative activity in the precious metal market, with managed money now aggressively long, whilst shorts have all but disappeared.

Indeed so strong has gold been of late that we’ve even seen the more ‘entertaining’ end of the finance media endorse gold investment, with Jim Kramer coming out and stating that every portfolio should have an allocation to gold and silver. Obviously we agree – though on a short-term basis, too much bullishness towards the sector makes us nervous, and we are more inclined to believe a correction can’t be too far away.

First: the facts. Gold prices have been on a tear the past week, with the price of the yellow metal climbing above USD $1240 an ounce, now up an incredible 18% in USD terms since the start of the year. Silver has come along for the ride of late too, currently trading at USD $15.70 an ounce. YTD it is now up 14%, with precious metals comfortably the best performing asset class of the year.

In Australian dollar terms, the news is even better, with silver now trading above AUD $22 per ounce, whilst gold has just broken through AUD $1750 per ounce, up nearly 25% from the lows of late 2015, and within striking distance of its all time highs.

Precious metals continued their impressive rally this week, with gold and silver climbing above USD $1150 an ounce and within touching distance of USD $15 an ounce respectively, as weak data, continued market volatility and a shock move by the Bank of Japan to implement negative interest rates boosted demand for safe haven assets.

The move by the Bank of Japan (BoJ) follows increasingly dovish tones coming from the European Central Bank (ECB), with the market expecting more easing from Mario Draghi soon, whilst weak data out of the United States has called into question whether the Federal Reserve will be able to make any interest rate hikes at all in 2016, let alone the four they supposedly have planned.

It’s been another positive week for precious metal investors, with the gold price comfortably pushing through USD $1100 an ounce, whilst silver has also strengthened, currently trading near USD $14.50 an ounce, up a further 2% for the week.

If the metals can hold onto their gains for the entire week, it will cap a very strong January 2016 for the sector, with both gold and silver up 4-5% for the month, a performance that is even stronger on a relative basis, when one considers the substantial decline we’ve seen in equity markets, and the broader commodity complex so far this year.

After closing out 2015 as one of the least popular asset classes on the planet, precious metals have come ‘back to life’, holding their own and even advancing in value whilst financial markets and broader commodities endure the kind of volatility we’ve not seen for years.

ETF investors are buying again, coin demand the world over is robust, whilst interest from retail clients, institutional investors and SMSF trustees has noticeably picked up in Australia, something we expect to continue throughout 2016

In this weeks market update, we’ll be looking at some of the latest gold charts, what is happening in stock markets the world over (decreases in which are spurring precious metal demand), and why gold as an asset class reminds us of the latest Hollywood blockbuster; “The Revenant”.

We are also going to share some thoughts on an interesting report published earlier in the week by PWC, who interviewed CEO’s around the globe regarding their view on the economy, and future investment and hiring plans.

Calendar year 2016 has had a volatile start for investors in financial markets, with equities the world over under significant stress. Fears regarding a slow-down and potential hard landing in China, as well as broader concerns about tepid global growth, as well as rising geopolitical tensions in the Middle East and Korea have seen hundreds of billions in ‘wealth’ wiped out.

No region has escaped the rout, with the pain felt in Shanghai, London, New York and Sydney too, with the ASX falling below 4,900 points earlier this week, in what has proved to be the worst start for equity markets on record.

Fortunately, those of us with investments in precious metals have been sheltered from this storm, with the price of gold rising back above USD $1100 an ounce at point, though some profit taking and some commodity index rebalancing has since seen the price of the yellow metal ease back toward USD $1,080.

Silver has held its ground, currently sitting just below USD $14.00 an ounce, whilst prices in Australian dollars for both metals have surged, with the weakness in the local currency pushing gold and silver toward AUD $1550 and AUD $20 an ounce respectively.

Demand for physical metal has been robust over the holiday period, especially at the retail level, with US Mint silver coin sales apparently quadrupling. With a gold/silver ratio near 80:1, we were happy to personally take part in that buying activity, and topped up our own SMSF with some silver over the holiday period.

We’ve noted many of our clients have also done so over the past few weeks, with gold and silver sales off to a solid start to the year, evidence of the robust demand that exists for precious metals today.

Was it worth it?

That’s the question we think a lot of investors will be asking as they wrap Xmas presents this year. The hours spent reading blogs and research and balance sheets and company announcements, all trying to work out which asset class to invest in, which ones to avoid, or which sectors of the market to focus their capital in.

In truth, whether we look at Australian equities, at gold, at the bond market, or global stock exchanges, 2015 is not one most investors (unless they’re been great stock pickers or market timers) will look back at fondly, with quite a few swings in asset markets, but few that have appreciated meaningfully.

What follows below is a review of 2015, not so much looking at asset market returns themselves, but what some of the major drivers have been, as well as commenting on a few things that have caught the eye in the last 12 months, both in Australia and overseas.

We will also share some our favourite charts for the year.

Obviously we’ll also take a look at the precious metal market, summarising our thoughts on its current state based on the developments we’ve seen not only in the past year, but since the cyclical peak in gold back in 2011.

Gold prices have eased this week, with the price of the yellow metal now trading at USD $1,053 an ounce, down nearly 2% from last Friday’s London PM Fix. Silver has also eased too, with the precious metal complex digesting the highly anticipated Federal Reserve monetary policy decision, which saw the US central bank raise interest rates for the first time in nearly a decade.

In Australian dollars, gold and silver are trading just below $1480 and $19.50 an ounce respectively.

The uptick in interest rates, which was largely priced in by the markets by the time it arrived, didn’t perhaps have the initial reaction many were expecting, with equities, gold and even some commodity currencies rising directly after the Fed handed down their long awaited decision.

Much of this has been reversed in the past 24 hours, with gold and stocks weakening, whilst the USD has rallied. The swings in the market are seen nearly in the chart below, which shows the last 3 days gold trading, broken down into specific 24 hour trading windows.

Precious metal markets have traded in a relatively narrow range this week, with market participants waiting patiently on the impending Federal Reserve interest rate decision, which will be handed down next week in the United States.

Gold and silver are currently trading at USD $1,072.90 and USD $14.24 an ounce respectively, more or less unchanged from the previous Friday. In Australian dollar terms, the metals are still on sale, below AUD $1500 and AUD $20 an ounce respectively, areas that have proved good buying over the last year or so.

In this week’s market update, we are going to look at the technical outlook for the gold market right now, as well as the latest futures market positioning. We will also cover some of the main reasons to own gold, including the embedded “option value” in gold, should it be remonetized at some point in the coming years.

Gold prices rallied overnight, erasing some of the losses from earlier in the week, which had at one point pushed the yellow metal below USD $1,050 an ounce. Silver, which at one point dropped below USD $14.00 an ounce has also staged a mini-comeback.

It’s been another soft week for precious metals, with the price of gold trading just above USD $1072oz, down USD $10oz on last Friday’s London PM Fix. Silver has fared slightly better, essentially flat over the week.

Local investors have had a tougher time of it, with the Australian dollar climbing above 72 US cents, and pushing the AUD gold price back below $1500 an ounce. Silver has also pulled back in local currency terms, with the spot price back below $20 an ounce.

The strength in the Australian dollar has been unexpected, especially in light of the ongoing carnage in commodity markets, with iron ore, copper and the like all under continued pressure. Indeed commodity indexes continue to hit new lows, whilst the recently released private capital expenditure survey for Australia showed a 9% drop in the last quarter, and a 20% drop year on year.

Note this is with a car manufacturing industry set to close, housing construction set to peak, and a significant unwind in mining related investment yet to fully play out.

Bottom line, this recent rally in the AUD will prove ephemeral, and we are using it as an opportunity, and adding to our own metal holdings recently.

After starting the week on the back foot, precious metals prices have staged a minor recovery, with gold currently trading at USD $1082 an ounce, unchanged from last Friday.

Silver has also treaded water this week, currently trading at USD $14.40 an ounce, after a three week period that saw the metal lose 10% of its value in USD terms.

In Australian dollars, both metals are still sitting above key levels, with gold sitting at AUD $1505 an ounce, whilst silver is sitting just above AUD $20 an ounce.

The stabilisation in the market was to be expected, after the relentless downward pressure that the precious metal sector has been facing in the past few weeks, which have seen the metals trade at their lows for calendar year 2015.

The stabilisation in the market was to be expected, after the relentless downward pressure that the precious metal sector has been facing in the past few weeks, which have seen the metals trade at their lows for calendar year 2015.

We think the market is potentially due for a bounce over the next week or so, and wouldn’t be surprised to see gold trade back toward USD $1100 an ounce, though whether it’s the start of a imminent and meaningful move higher remains to be seen.

It’s been another tough week for precious metal investors, with gold in both USD and AUD easing further. The catalyst was last Friday’s non-farm payroll report, which smashed expectations, and further increased the likelihood of an interest rate hike by the Federal Reserve in December.

Gold in USD is currently trading at USD $1,084oz, whilst silver is sitting at USD $14.42oz. Silver has shed close to 10% since late October, when it was trading above USD $16oz.

In Australian dollars, it has been a challenging week for metals investors too. After falling toward USD $0.70 late last week, the local currency has picked up, with yesterday’s unbelievable (literally unbelievable) jobs report in Australia ending any hope of a pre-Xmas rate cut in Australia.

AUD Gold is currently sitting at $1521oz, whilst silver is still holding just above $20oz, an area that proved good buying in May, August and September of this year.

Gold and silver prices have been in free fall this week, as increased odds of an interest rate hike by the Federal Reserve next month have battered sentiment toward precious metals.

At present, gold is trading at USD $1106 an ounce, down USD $80 per ounce, or some 7% from the highs it had reached in later October 2015. Silver has suffered a similar fall in USD terms, currently trading at USD $15 an ounce.

Local investors have not been spared this week either, with gold in AUD easing the better part of AUD $100oz, with the AUD still holding above USD $0.70.

The Reserve Bank decision to hold interest rates helped support the local currency, though most forecasters still see further downside in the cash rate over the next few months.

And part of the reason for that is the RBA still seem far too optimistic regarding the outlook for the local economy, with their latest statement of monetary policy predicting a stabilisation in our terms of trade, and growth heading back towards 4% by the end of 2017

With the mining capex boom not even half way through unwinding, residential housing construction slowing, a complete dearth of business investment in the country, negative real wage growth, and declining growth in immigration, this is never going to happen, unless the government turns on the stimulus tap in a way that would have made even the previous Labor government blush.

Further rate cuts should nudge the AUD lower, which will help boost local precious metal prices.

It’s been a volatile week for precious metal investors, with gold and silver prices easing after the Federal Reserve meeting. The sector had started the week on a more positive note, with gold pushing up toward USD $1180oz, and silver pushing above USD $16oz.

The release of the Fed monetary policy statement changed all that, with gold dropping sharply in the aftermath, and easing ever since. At present, gold is trading at USD $1146oz, whilst silver has fallen to USD $15.61oz.

AUD investors have fared better this week, with the local currency weakening off the back of a low inflation print and increased bets of a Melbourne Cup day rate cut (more on this below).

The AUD has dropped from USD $0.7264 to just USD $0.7080 over the past few trading days, helping support AUD gold prices, which are still trading around $1620oz, whilst silver is sitting at $22.20oz, largely unchanged on the week.

Turning back to the Fed, and in a surprise to markets, their latest statement on monetary policy was widely perceived as hawkish, lifting the chances of a December rate hike.

The full statement, for those interested, can be read here, with the market particularly focused on the statements around household spending and business fixed investment, whilst the lack of reference to global instability was also seen as a hawkish turn.

Precious metal prices have had an uneventful week, easing USD $10 per ounce, whilst in Australian dollars, we’ve seen the market consolidate just above AUD $1600 per ounce. Silver has also had a relatively uneventful trading week, currently sitting just below USD $16, and above AUD $22 per ounce.

The consolidation in precious metal prices was hardly unexpected, after a solid 2 month rally that had seen gold rally by USD $100oz, and even more impressive moves in silver.

Despite the increasing likelihood that the worst is behind us for USD Gold, the market as a whole is still a long way away from being ‘optimistic’ about future prices. Evidence of this was seen at this weeks LBMA conference held in Vienna, where the average gold price prediction for next year was just USD $1159.80 an ounce, more or less unchanged from where we are today.

Indeed pockets of extreme pessimism remain, with some forecasters still discussing USD $800oz gold prices.

This is of course a good sign from a contrarian perspective, as too much optimism typically leads to falling, not rising prices. We are quite certain that when gold is one day a bubble, we won’t be seeing timid or even negative price outlooks for the yellow metal.

For local investors, the outlook for the AUD is the most relevant factor to consider short term, which we’ll look at in this short technical piece below.

Precious metal prices have continued their rally this week, with gold rising from USD $1151oz to USD $1182oz, up 2.5% since last Friday. Silver has also rallied, rising just over 1%, to USD $16.24oz.

We’ve also seen a rally in AUD prices, with the yellow metal now comfortably back above $1600oz. Note this is despite the local currency trading back above USD $0.73, a move we expect to be short-lived

Back to gold, and the rally over the past couple of months (the London PM Fix on the 22nd July was USD $1,088oz), has of course had many drivers, not least of which was the Fed decision not to hike interest rates in September.

With US data almost overwhelmingly poor over the last few weeks, it is clear that the Fed has now missed its window to hike interest rates in 2015. Further evidence of this was seen at least a couple of times this week, with;

• The Philadelphia Fed manufacturing index falling 4.5 points. New orders, workweek, inventories all fell noticeably

• Retail sales (ex autos), falling 0.3% for the month, far worse than forecast

Indeed so poor has data been of late that the market is starting to doubt that we’ll even see a rate hike by Q1 of 2016.

Unsurprisingly, this has scared a lot of gold shorts out of the market, whilst the more constructive technical outlook (more on this below), is encouraging a few more longs into the game. And whilst we wouldn’t be surprised to see gold spend a few days consolidating recent gains, a strong finish to 2015, with gold finishing the year above USD $1200oz is looking possible.

For Australian dollars investors, the news could be even better. The main reason we say that is that we expect the RBA to cut rates at least once more this year, or at least market expectations of that cut to strengthen. With that in mind, a weakening of the currency between now and Christmas is likely.

Should this happen, returns for local investors will be magnified. As we stated earlier, the AUD has rallied back above USD $0.73, up some 6% from its mid September 2015 low.

Were the AUD to fall back below USD $0.70 by the end of the year, then we could easily see the AUD gold price start 2016 above $1700 an ounce.

That would be a return for calendar year 2015 of some 20%, which will have gold comfortably outperforming stocks, bonds, cash and even Sydney property for the year, should things stay as they are for the next two months.

With that, we’ll take a quick look at the technical picture for the gold market.

Technical Outlook

with John Feeney

In last weeks market update we spoke of the tightening trading range for gold and the possible breakout if we could see a close above the $1,160 level. This has indeed happened, and gold quickly rallied back above the $1,180 US level in a few days. The $1,180 level is an import one for US gold as it was the absolute bottom for 2013 and 2014.

The recent rally which can be seen below may be due a small pullback as we have the RSI almost overbought and William % signalling short-term overbought. But we feel this move has a lot of momentum, as faith in the Federal Reserves economic prowess is slowly diminishing.

A pull back from this level (USD$10-$20 an ounce) could pose a buying opportunity.

We have further confirmation of a shift in sentiment with the gold miners index rallying hard during October, and the relative outperformance of silver over this period too. The breakout and close above $1,180 can be seen below and is about as positive a start to October that one could wish for.

The chart above is supportive of those who argue that the August low for gold was a meaningful long-term bottom.

Of course back in August, most market participants were still expecting a rate rise, whilst the US stock market (S&P 500) was at 2100. Hedge Funds were also net-short gold for the first time, whilst the mainstream financial press was incredibly bearish gold.

From a contrarian perspective, the sentiment toward gold in August was about as bad as it gets, something we commented on in this piece (published 7th August), where we pointed out that “Sentiment, and the current positioning in the precious metals market is truly awful. It is a wonderful opportunity."

Inflation – it’s here all right.

The other piece of ‘market news’ overnight was the release of the latest US inflation data. Ex food and energy, the number came in at 1.9% for the year, whilst the number including food and energy registered 0.00%, a result of the huge fall in commodity prices over the past year or so.

Low official inflation is something that “haunts” the developed world right now, as low wages growth, excessive debt levels and a more prudent consumer all contribute to slower rates of growth.

Of course, low official inflation only encourages the high priests of neo-keynesian economics push for ‘more stimulus’, which inevitably means more money printing, and the accumulation of even higher levels of debt.

With no inflation to worry about, they see no harm in this policy, arguing it will encourage spending, levitate asset prices and create a ‘trickle down’ wealth effect.

But is there really no inflation? We aren’t so sure, and wanted to share a few observations on this phenomenon.

One place to look in the United States is healthcare, where we’ve seen quite colossal price inflation in the past 15 years. According to a recently published article by Mauldin economics, the total premium for family coverage for healthcare just topped $17,500.

That is up from $5,700 at the turn of the century, an annualised inflation rate of 7.70%

Lets stay in the US, but move from healthcare to the stock market. Wall Street, and the legion of brokers, analysts, asset consultants and fund managers who profit from it have of course celebrate the bull market in stocks we’ve seen since early 2009. And they’ve had much to celebrate too, with the S&P 500 rising from under 700, to over 2000 points.

But what has it cost?

Well, if we look at the cyclically adjusted price earnings ratio for the S&P500, we can see that it has risen from roughly 15 to over 25.50 since early 2009.

Put another way, the cost of buying a share in the earnings of the companies that make up the S&P500 has risen by 70% in the past six and a half years, which represents annual inflation of around 10%.

Hardly benign!

In Australia, whilst many in the market celebrate our soaring housing market, mortgage holders are faced with no choice but to go ever deeper into debt, in order to secure a piece of the Australian dream.

An article in the Sydney Morning Herald from early October 2015 highlighted that the average NSW mortgage for owner occupiers had risen by $78,100 in just 1 year. That is about equivalent to the full time wage of an average Australian, and represents a rise of 22% in JUST ONE YEAR.

If that isn’t high inflation then I have no idea what is.

Finally, consider the amount of money one needs to have accrued in their working life, in order to afford a comfortable retirement, without depleting their capital.

According to ASFA, a couple needs $58,784 in income per annum, in order to live what they define as a comfortable lifestyle. Let us round that up to $60,000 for simplicities sake.

The question is, how much capital must one have in order to earn this income in any given year.

Assuming a diversified portfolio can be expected to earn an income equivalent to the RBA cash rate plus 1%, then we can safely state that

• Pre GFC, when the RBA cash rate was 7.25% (ergo an 8.25% income on assets), a couple would need to have accumulated capital of just over $725,000 in order to generate an income of $60,000 a year

• By Q3 2015, the same couple will need to have accumulated capital of exactly $2,000,000 in order to generate an income of $60,000 a year (assuming a 3% rate of income on assets invested)

That increase, from $725k to $2m represents an annual inflation of over 15% in the past six years in terms of capital accumulation required to preserve a comfortable retirement.

The bottom line to this is that prices, whether we look at healthcare, housing or holding financial assets, are rising, and the economic path we are heading down is a dangerous one.

For those who want a final read, and a different take on inflation, we recommend this piece by Chris Joye from the AFR, which is well worth the time.

So is the Gold Bear Over?

The strength in precious metals over the past few weeks has many asking if the cyclical bear market in gold and silver is now finally over. Pater Tenebrarum, an analyst I have the highest respect for seems to think so, stating in this worthy read that he thinks that “a significant low has finally been put in”.

Whilst we share Pater’s confidence in the long term direction of this market, and are highly encouraged by the recent price action, it does pay to mention that we’ve seen a number of counter-rallies in gold over the past couple of years, none of which have endured.

As such, dollar cost averaging still seems an appropriate strategy for long-term investors.

In Australian dollars, we are still more than comfortable with our position that the worst of this cyclical correction is over, and we have personally been adding to our own positions for the entirety of 2015.

I remain confident precious metals will be the best performing liquid asset class between now and the end of this decade, and certainly the most important one to physically own, but patience is a virtue, or so they say!

Until next week.

Disclaimer

This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. Any prices, quotes or statistics included have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.

It’s been a profitable start to the month for precious metal investors, for USD buyers at least.

After closing out Q3 2015 around USD $1114oz, gold rallied hard on October the 2nd, with a shocking US non-farm payroll report all but ruling out any chance of a Federal Reserve rate hike in 2015.

Silver also liked the news, and has put on approximately USD $1oz, or over 6.4% for the week.

In this market update, we’ll look at the latest economic data out of the United States in more detail, as well as look at the technical picture for the precious metal market.

We will also look at the Gold/Silver ratio, and finish with a look at central bank gold activity.

Precious metal prices eased this week, as market participants breathe a sigh of relief at the end of what has been a truly forgettable Q3 2015. Stating the week out closer to USD $1150oz, gold has fallen some 3%, though its still sitting above USD $1110oz, whilst silver is off just over 2% over the same time period.

In Australian dollars, physical gold can now be picked up for just under $1600oz, whilst silver is sitting just below $21oz.

There is of course the potential for some more volatility in the next 24 hours, with the much awaited non-farm payroll report due out in the United States. We’ll buy on weakness if the metals dip any further.

This weeks report looks at a number of developments over the past seven days. These include;

• The huge sell off in stocks in Q3 2015

• An update on the Indian Gold Monetisation Scheme

• Central Bank buying of Gold – and Australian Dollars

• Gold in SMSF Portfolios

We will also take a quick look at the drumbeats for more QE, which grow ever louder.

It’s now just over a week since the Federal Reserve decided not to raise interest rates. In that time, precious metals have been one of the few asset classes that have responded well to the news, with the price of gold now trading back at USD $1150oz.

In Australian dollars, the news is even better for investors, with the AUD price of gold heading toward AUD $1650oz, up close to 5% for the week. Silver has responded well too, and has climbed back above USD $15oz, whilst in AUD its approaching $22oz, with a noticeable increase in physical demand for gold’s ‘poor cousin’ over the past few weeks.

Whilst it’s been a good week or so for precious metals, the news has not been so good in equity land, with the Dow Jones off close to 1% over the last 5 days. The Dow, which had traded above 18,000 points in mid July, is now off over 10% in the past two months, with that extra volatility in adding some upward momentum to gold prices.

It hasn’t just been overseas stock markets that have struggled in the aftermath of the Fed’s very dovish non-hike. The ASX has also been under pressure, closing below 5,000 points at one point earlier this week, though it’s since clawed back above that level.

Looking back at the gold market and it’s clear that some short covering in the futures market has been at least partially responsible for the uptick in prices this week, as the declining chances of a US rate hike this year (no matter what Janet Yellen said in her just completed speech), no doubt scaring a few of those who’d bet on falling gold prices between now and the end of the year.

We’ve also seen more evidence of robust demand for physical gold, with Chinese gold imports from Hong Kong hitting a 3 month high in August.

The USD $1150oz mark will no doubt prove a crucial area for gold in the coming days. And with that, lets take a look at the technical picture

Precious metals prices moved higher overnight, as the much awaited September Federal Reserve meeting came to a close, with no rate hike announced. Gold, which had been trading back around USD $1100oz at the start of the week, jumped back above USD $1130oz, whilst silver was also up, last trading around USD $15.27oz.

In Australian dollars, gold headed back above $1550oz, last trading at $1576oz, whilst silver is now back above AUD $21oz.

Starting with the Fed, and in news that surprised no one who follows the precious metal market, or even the broader economic and financial landscape with open eyes for that matter, Janet Yellen and her team decided to hold fire on any potential interest rate increase.

Not only have stocks, bonds, commodity and currency markets been more volatile of late, but economic data the world over, and even in the United States, has been underwhelming at best.

In the last few days alone in the United States, we’ve seen;