Gold Analysts Split on Fed View as Rate Doubts Spur Volatility – by Luzi-Ann Javier, Eddie Van Der Walt and Ranjeetha Pakiam (Bloomberg News – October 14, 2015)

The Federal Reserve is giving the gold market a splitting headache.

With mounting doubts over when Fed policy makers will raise U.S. interest rates this year, traders and analysts are becoming increasingly divided on where prices go from here. Half of the respondents in a Bloomberg survey expect bullion to drop for a third straight year in 2015, and the rest are predicting a gain.

As the outlook got cloudier for interest rates — which can erode the appeal of holding metals that don’t offer yields — gold volatility has jumped close to a three-month high. Hedge funds have been befuddled, betting the wrong way on price moves in four of the past seven weeks.

Even the two most-accurate forecasters over the past quarter are at odds over what the Fed moves mean for bullion, data compiled by Bloomberg show.

“Some people are just going crazy waiting,” said Alan Gayle, a senior strategist for Atlanta-based RidgeWorth Investments, which oversees $40 billion. “There’s a great deal of Fed watching and Fed guessing going on. The uncertainty surrounding the next moves by the Fed make it difficult to assign discounting factors” for gold, he said.

Bullion has fallen for five straight quarters, the longest streak since 1997, as the U.S. economic recovery gained momentum and the job market improved, fueling expectations that the Fed would stick with its guidance for higher rates. That picture has been muddled over the past month. Prices on Wednesday closed above the 200-day moving average for the first time since May.

On Oct. 2, an employment report missed economists’ estimates, signaling the global slowdown may be having ripple effects on the American economy. Policy makers at their Sept. 16-17 meeting delayed liftoff, citing concerns over growth, minutes of the gathering showed. Half way through October, gold futures in New York are heading for their biggest monthly gain since January.

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