The Daily Market Report: Gold Consolidates Around Mid-Range

08-Sep (USAGOLD) — Gold has stabilized near the midpoint of the recent range. Last week’s jobs data were generally inconclusive, providing no definitive clues at the Fed’s next move. We may see further consolidation through next week’s FOMC meeting.

Stocks have rebounded on speculation that the Chinese central bank is going to provide additional monetary stimulus. Global shares were buoyed by the prospect, which fostered a risk-on environment. However, gold was underpinned by a modestly weaker dollar.

Given the myriad of negative growth and price risks evident, it still strikes me as unlikely that the Fed will raise rates for the first time in nearly a decade. The global deflationary pressures in particular have to be terribly concerning to all central banks. Nonetheless, there is still a sizable contingent that believes the Fed should initiate lift-off.

Based on Fed funds futures, the probability for a September rate hike as dropped significantly in recent weeks to just 24%. That was largely driven by extreme market volatility attributable to China; although China turned around and pointed the finger at the Fed as the source of the volatility.

Chinese devaluation of the yuan and subsequent use of FX reserves to support the currency certainly has the market on edge. Chinese reserves fell a record $93.9 bln in August, largely because of PBoC intervention.

Simultaneously, gold demand in China remains robust. SGE withdrawals were a stunning 301.96 tonnes in August, bringing the year-to-date total to 1,718.20 tonnes. That’s well ahead of the record pace of 2013.

“The Chinese people continue to accumulate physical metal,” said USAGOLD’s Michael Kosares in a post yesterday. Something he predicted in a special report that was published back in July. You can read that report by clicking here.