Market activity today muted until we get the Fed decision on interest rates
December 12, 2006
The market activity today should be thin and rather muted until we get the Fed decision on interest rates today at 2:15 pm ET. More than likely this will be a non-event unless the Fed makes some unexpectedly pointed statements about easing rates in the beginning of 2007 due to slowing growth in the US economy. The markets are positioning themselves as if this won't happen, so we shouldn't expect much today from this Fed meeting. We're at the end of the year and no one in any market wants a surprise from the Fed, so the statement will likely be as neutral as possible. Look for some erratic price behavior before and after the announcement, but once the market has digested the statement, gold should find it's footing and press forward.
So the next move on interest rates for the Fed has been effectively punted into the 1st quarter of 2007, which is when we're expecting to see the next big gains in the precious metals sector.
While the dollar will continue to drive the price action and headlines in the precious metals markets in the near term, we're continuing to get great news on the lack of new supply entering the market with each production update. Prices are double where they were five years ago and miners still can't pull more metals out of the ground! Supply/demand economists keep calling for an equalization of supply that will swamp new demand because of the significant price increases. That just isn't going to happen. Gold could reach $850 per ounce and mine production in South Africa and Australia would still be slumping off past numbers.
SA gold output slumps 7.1% 12/12/2006 12:27
Reuters
Johannesburg - South African gold output fell 7.1% in volume terms while overall minerals production increased by 2.5% in October compared with the same month the previous year, official data showed on Tuesday.
Production of non-gold minerals rose by 4.4% in October, Statistics South Africa added.
In September, year-on-year gold sales rose 99.3% to R4.25bn, sales of non-gold minerals increased by 46.1% to R16.64bn and total mineral sales gained 54.5% to R20.897bn, a statement on www.statssa.gov.za said.
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