Gold price to trend side ways until first Fed hike

The gold price climbed to a two-week high of a good $1,130 per troy ounce yesterday evening on the back of a depreciating US dollar. As anticipated, the US Federal Reserve chose not to raise interest rates yet yesterday. 

The latest turmoil in the emerging markets, the increased volatility on the financial markets and the low rate of inflation in the US were doubtless what prompted the Fed to leave interest rates unchanged. 

"These are more likely to start in December than in October because a whole series of additional economic data - labour market reports in particular - will then be available to enable a better appraisal of the situation", says Commerzbank. 

Furthermore, Fed Chair Yellen emphasized the negative impact of the strong US dollar on inflation, and also gave no clear indication that a rate hike might be imminent. Nonetheless, she did make reference to the fact that a majority of FOMC members expect interest rate hikes to begin before the year is out.

"Until such time as a first rate hike is made, the gold price is likely to continue trending sideways within a relatively narrow trading band, as it has done in recent weeks", anticipates Commerzbank. 

Meanwhile, physical gold demand in India is clearly weak, according to trading sources, the discount on gold prices there as compared with world market prices in London already amounted to as much as $10 per troy ounce this week, which is surprising given that the festival season is just around the corner.