Monday, September 2nd 03:40 PM IST

Gold rebound to be tested with FOMC meeting outcome of Sept 17-18

# gold  # precious metals  # FOMC meeting  # China GDP  # industrial metals  

Commodity indices have generally performed better in the seconnd half of 2013 primarily due to production disruptions boosting energy returns and a bearish outlook on China supporting industrial metal returns, Deutsche banks said.

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FRANFURT (Bullion Street): Precious metals has so far provided strong returns in the third quarter but Gold rebound to above $1400 levels could be tested with the Federal Open Markets Committee (FOMC) meeting on Friday, according to a Deutsche Bank weekly report.

US Gold futures for December delivery rose to a high of $1411.2 per ounce last week but is now trading lower at $1393.5 on early electronic trading on Monday.

Commodity indices have generally performed better in the seconnd half of 2013 primarily due to production disruptions boosting energy returns and a bearish outlook on China supporting industrial metal returns, Deutsche banks said.

"We expect the next event risk for precious metals returns will be the FOMC meeting on September 17-18. We would expect gold returns will be vulnerable in the event that the FOMC meeting triggers a further increase in US yields and a strengthening in the US dollar. However, in an environment where global PMIs are improving we would view silver as likely to be the relative out-performer along with PGMs within the sector."

Syrian crisis enhanced geo-political risks and gold and crude oil are more sensitive to such developments as safe haven buying and threat of oil supply disruptions enhance their appeal.

However, other commodity sectors can still be vulnerable to geopolitical shocks if they trigger a broad based equity market sell-off and downgradesto global growth as these could quickly contaminate industrial metal prices," Deutsche Bank said.

An analysis of price reaction of gold and oil to major geopolitical, economy and financial shocks over the past 30 years has revealed that after-shocks of geopolitical events have tended to be shorter in duration and more muted in magnitude for both commodities over time,with gold particularly desnsitized by major crises to hit the world financial system.

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