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Traders see Fed rate hike, Gold prices hit new high amid ‘double dip’ fears, Silver price to rise “substantially”


CHICAGO | Tue Sep 21, 2010 3:24pm EDT

CHICAGO (Reuters) – Short-term interest rate futures traders deferred expectations that the Federal Reserve will tighten monetary policy until December 2011, after policymakers on Tuesday said the Fed stood ready to provide more support to the recovery.

Policymakers at the U.S. central bank expressed greater concern about the sluggish pace of economic growth and uncomfortably low inflation than when they last met in August and left intact their commitment to keeping rates low for an extended period.

Traders now see December 2011 as the first Fed meeting at which policymakers are more likely than not to increase their target rate for overnight lending between banks, trading in Fed funds futures at CME Group Inc’s (CME.O) Chicago Board of Trade showed.

Earlier on Tuesday, traders were pricing in about a 61 percent chance of a rate hike at the Fed’s November 2011 meeting. After the Fed released its statement, traders gave it a 40 percent chance.

Fed funds futures traders expect the Fed to keep its target rate below 1 percent until at least August 2012, trading in the contracts show.

Short-term interest rate futures that expire in the next few months barely budged after the Fed’s statement, suggesting traders are betting if the Fed were to provide any additional monetary support, there would be little impact on overnight lending rates, which are already near zero.

The Fed currently targets the benchmark rate between zero and 0.25 percent, and this month it has averaged about 0.20 percent.

(Reporting by Ann Saphir; Editing by Padraic Cassidy)

GOLD MARKET

Tuesday 21st September 2010

The price of gold yesterday hit a record high of US $ 1283.25 an ounce.

The cost of the precious metal shot up amid new concerns about the health of the global economy and fears of a possible “double-dip” recession.

Concern, particularly about the US economy has seen many investors take refuge in the “safe haven” of gold in recent weeks.

SILVER MARKET

Tue Sep 21, 2010 6:11pm BST

* Sees silver at $25-$30/oz in next year

* Expects demand growth at more than 6 pct/yr

DENVER, Sept 21 (Reuters) – The price of silver is expected to rise “substantially” in tandem with the gold price, the head of Hecla Mining Co (HL.N) said on Tuesday.

President and Chief Executive Phillips Baker also told Reuters that demand for silver is starting to rise after the recession, and he expects it to grow by more than 6 percent a year as the global economy expands.

“I have the view it is going to go up substantially and I certainly would not be surprised to see $25 to $30 (within a year),” Baker said in an interview on the sidelines of the Denver Gold Forum industry gathering.

“Silver continues to trade with gold,” he said. “There’s this idea of ‘poor man’s gold.’ There’s quite a bit of movement in the silver price that will happen as a result of that.”

Baker said silver XAG= — currently selling at just over $20 an ounce compared with gold around $1,275 – has been underperforming gold in the longer term, but is catching up.

“There’s a strong case for further weakening of the U.S. dollar, and with that will come a strengthening of the gold price and silver will follow,” Baker said. “If the view is that gold will trade up, I think you can expect silver to trade up even more.” (Reporting by Steve James)

GOLD MINING 

Denver, United States — MININGREVIEW.COM — 21 September 2010 – The price of gold could reach US$1 500 per ounce by the end of the year, says the chief executive officer of South Africa’s third-largest gold producer, Harmony Gold Mining Company.

This prediction from Graham Briggs came as the gold price hit a record high for a third consecutive day, with spot gold reaching US$1 283.70 per ounce.

“I don’t think it’s going to stop,” he told Reuters during an interview on the sidelines of the Denver Gold Forum industry gathering. “You’re never disappointed as a gold bull.”

Gold has risen 25% in the last year and, asked to hazard a guess at how high the price might go, Briggs said: “Three thousand dollars is unlikely at the end of the year, but if someone said fifteen hundred, that wouldn’t strike me as too crazy a statement.”

Briggs cited several factors driving the price of the precious metal, including Asian central banks buying gold and production declining over the past few years, although he noted that it had risen recently in China and Australia.

“I think gold financial issues in the world demonstrate the basic principle of gold ‒ that it’s basically a good investment,” he added.

Briggs revealed that Harmony Gold ‒ which operates 10 underground mines and one open pit in South Africa ‒ was transitioning to a lower-cost company by closing high-cost mines, and was on track to produce 2Mozpa. He said that in 10 years’ time he expected the company to be producing about 2.7Moz annually.

Harmony is also looking to grow organically through exploration, especially in Papua New Guinea, where it has one mine, Hidden Valley, and is developing a copper/gold project at Wafi-Golpu, according to Briggs. He said Harmony’s exploration budget had risen to around US$40 million (R292 million) per year from up to US$8 million (R58 million) five years ago.

Asked why a South African-based company was not looking at other parts of the continent like rivals Newmont Mining Corp which is in Ghana, he said Harmony had looked at West Africa several years ago. Briggs pointed out that other areas of Africa like Eritrea and Ethiopia were opening up. “We are keeping a watching brief on some of those.”

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Discussion

4 thoughts on “Traders see Fed rate hike, Gold prices hit new high amid ‘double dip’ fears, Silver price to rise “substantially”

  1. gonna send this to my mom

    Posted by weighty | September 26, 2010, 6:29 pm
  2. Very well written article. I’m really impressed by you knowledge of the subject. Fell free to write more.

    Posted by Wendie Osiecki | October 3, 2010, 1:59 pm
  3. Excellent article my friend. This is exactly what I’ve been looking for for quite a time now. You have my gratitude man.

    Posted by Winfred Wriston | October 3, 2010, 6:20 pm

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