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Should you invest in commodities in Q4?

on October 19 | in All, Commodities, Investing | by | with No Comments

The precious metals like Gold and silver have been witnessing uncertain growth during this year. We saw some increase in Gold prices due to weakening dollar and the decision of Federal Reserve to not increase interest rates for now. Both Gold and Silver hit six year lows during Q3 and followed a bearish trend due to anticipation that Federal Reserve will increase interest rates. Unfortunately that did not happen because of unsatisfactory Jobs Report in US which forced the Federal Reserve to maintain the interest rates.

Though these commodities have been seeing an upward trend recently, they are expected to decline by Q4 as the Federal Reserve will increase the interest rates soon. The price of commodities like Gold and Silver is ultimately driven by the Federal Reserve. The anticipation of a strict monetary policy has been a viewpoint ever since the announcement by Federal Reserve that it would taper Quantitative Easing. It was witnessed by the bearish trend of precious metals like Gold and silver and this was what the market anticipated as well. But with the FOMC meeting on September 17th during which the Federal Reserve decided not to increase the interest rates, Gold started to witness a bullish market reaching it’s 1 year high and was trading at $1,160 an ounce. But the impending lookout of rate hike by the end of this year is going to change the path of Gold and we are expecting to see a downward trend again. Binary options traders can definitely profit by capitalizing on this trend change. The commodity market is expected to decline by the year end as the interest rate hike by Federal Reserve is inevitable. So instead of investing in Commodities in Q4, you can take advantage of trend change by speculating the Gold price and make money through binary options.

The US Nonfarm payroll employment report which was released by U.S. Bureau of Labor Statistics during September 2015 indicated that jobs increased by 142,000 in September while the unemployment rate hit a 6 year low at 5.1%. But they were anticipated to create 220,000 jobs by August which did not happen. Due to this unsatisfactory US Jobs report, the Federal Reserve is reluctant to hike the interest rates. Inflation is not supporting this situation and consumer prices have reduced by -0.1% m/m during August and Annual Consumer Price Index was just 0.2%, much less than the Fed’s target of 2 percent. The prices of commodities continue to remain miserable.

Investing in commodities

Investing in commodities

The decline in Chinese market which is also the 2nd largest economy has impacted the global market and resulted in slowdown. The sharp fall of the Chinese stock market during August resulted in heavy demand for precious metals like Gold. Greece was also considered as a major source of uncertainty in global markets, but after the bailout program announced by the Greek Government and the decision that it will remain within the EU made things smoother.

Hence looking forward, the Federal Reserve is more likely to increase the interest rates soon in Q4. Commodities like Gold and silver are always considered as safe haven of investment but with the current market situation they are becoming hot. Since the interest rates are still low, investors are preferring commodities over Government Bonds as they can’t get higher rates of return from the bonds. But eventually if the Fed announces the interest rate hike by end of this year, then the commodity prices will start declining as investors will put their money on Treasury bonds to seek better returns. Hence it may not be a Good idea to invest in Commodities in Q4 but to make use of the changing market trends by investing wisely in binary options. The question of will commodities decline towards 2016 is in the minds of all investors as the Fed announcement for interest rate hike is likely to happen in Q4 of 2015.

Sources: investing.com / cnbc.com

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