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Commerzbank still expects year-end Gold price at $1,300 an ounce

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NEW YORK (Scrap Register): Commerzbank maintained its view that gold prices will be around $1,300 an ounce when 2017 winds down. The metal was above this prior to a more-hawkish-than-expected U.S. Federal Open Market Committee Wednesday, but is now modestly below.

Gold fell after the Fed meeting as the U.S. dollar rose and yields on 10-year U.S. Treasuries climbed to a six-week high. As expected, the Fed announced that it would be reducing its balance sheet from October. More importantly, the Fed members stuck with their rate-hike expectations, Commerzbank added.

“The Fed signaled to the market that it would probably raise interest rates one more time this year – we expect this to happen in December – and by three more times next year. Prior to the Fed’s meeting, the market had only priced in one rate hike by the end of 2018. This has now changed somewhat,” said analysts at Commerzbank.

As of early Thursday, analysts said, the Federal funds futures were putting the probability of a rate hike in December at over 60%, whereas it was below 40% a week ago. For next year, the market now envisages one and a half rate hikes, Commerzbank added.

 “However, this still leaves a big gap between the Fed’s expectations and what the market is pricing in. If the market were to price in further rate hikes, this would presumably keep the gold price in check. Consequently, we still expect to see gold trading at $1,300 per troy ounce at year’s end,” Commerzbank noted.

As of 8:53 a.m. EDT, Comex December gold was trading at $1,292.10 an ounce.

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