Gold subsequently hit a low of $1303, although short covering caused the metal to close at $1312. We continue to feel adding to shorts on a daily close below support at $1307 could be positive from a momentum perceptive.
US data was a touch weaker than anticipated, with industrial production rising 0.4% in August, although manufacturing activity gained 0.7%. New York Fed manufacturing was also a touch weaker.
Looking forward, it’s now all about the FOMC meeting and although the meeting starts today, we won’t actually get any headlines until Thursday morning at 04:00 AEST. It really could go any way, and there is so much to look out for to drive currencies, bonds, equities and gold. Ultimately we feel the Fed will go down the dovish route and cut its bond-buying programme by $10 billion, although this will be balanced by some fairly dovish offsets. We will write more tomorrow, but as things stand there doesn’t seem to be much reason for the Fed to be overtly aggressive, although for gold to really see downside we would need to the Fed cut its bond buying pace by more than $10 billion and give a fairly upbeat assessment of the economy in 2014 and 2015.