Gold consolidates near $1230 ahead of Fed policy review
The Federal Reserve will declare their stand on interest rates on Wednesday. While analysts expect the central bank to culminate bond purchases, it is unlikely that the Fed will deviate from their earlier stand of keeping interest rates low for “considerable time.” The not-so-encouraging data from U.S. housing sector and dip in capital goods orders by 1.3% in September support this stance. This augurs well for the precious metal which generally shares an inverse correlation with interest rates.
Central banks remain buyers; Swiss poll an important indicator
World Gold Council reports that central banks have boosted their gold reserves by 148 tonnes between January and August 2014. Owing to its geopolitical situation, Russia has been a significant buyer for the seventh consecutive month, adding 37 tonnes to its holdings in September.
Another major event is the Swiss referendum on November 30, for increasing its central bank’s gold holdings to one-fifth of total assets over the next five years. The Swiss National Bank will have to stop selling gold immediately if the referendum if passed.
China and India demand for gold surges
China and India, the global top two consumers of the yellow metal, have registered an increase in demand. As per Swiss trade data, exports to India soared to 58.5 tons in September ahead of Diwali festival, the major gold buying period of the year. Exports to China touched the 12 tons mark as well, after hovering around three tons for the last few months. Such increased retail demand coupled with low interest rates and geopolitical situation should support to hold in the $1,180 – $1,250 range.