Gold’s historical trend is downward due to the strengthening dollar, but it is especially complex this month due to several conflicting factors.
Fed inaction last week paved a positive path for gold and the price of the commodity rose.
The ECB meeting this week and speculation of potential action serves as a temporary setback, but I expect inaction from the ECB to allow gold to go higher.
Gold gains on the passing of the ECB meeting and then intensifying concern about a potential U.S. government shutdown at the start of October.
However, when the government shutdown crisis is resolved, investors will again sell gold lower on speculation about an October Fed action.
A golden path has just been paved for gold investors, but it is full of obstacles. The Federal Reserve’s decision to hold off on interest rate liftoff, with all indications pointing toward non-action at least until December and possibly longer, in my opinion, is highly supportive to gold. Gold would be poised to move higher as a result of the removal of the dollar block against it. But be careful betting on it at the start of this week, as anticipation of potential ECB action could set a short-term speed bump. I see hope in ECB action eventually finding letdown, and gold benefiting again from that and the intensifying concern about a potential government shutdown in the U.S. Thereafter, though, investors will begin propping up the dollar and penalizing gold on October Fed meeting worries. The next month, therefore, is a complex one for gold.