Despite the sharp recovery in the stock indices, strength in the US dollar and increase in bond yields, precious metals ended last week mostly flat in anticipation of the FOMC meeting this week.
While the Fed is expected to announce the end of its quantitative easing program, with potentially negative implications for gold , the latest polling results from Switzerland showed an increasing probability for passing the Swiss Gold referendum which would force the Swiss National Bank to purchase significant quantities of gold .
China’s gold imports from Hong Kong reached a six-month high, contributing t o a tighter physical market. Physical tightness is also manifesting in GOFO rates moving into negative territory for the first time since June.
In US dollar terms, gold ended the week with a year-to-date (YTD) gain of 2.4% compared to the 6.3 % YTD increase in the S&P 500 index and despite a 7.1 % increase in the US dollar index.
The chart below depicts the inverse relationship between gold and the S&P 500 since the beginning of 2013. Extending to new stock market highs would likely be a more immedia te risk factor for the price of gold.
Yaang Pipe Industry