Traders Buy into Commodities Ahead of Fed Meeting

Gold prices increased on Friday and came back from previous lows as a positive U.S. Non-Farm Payrolls report did not change the belief that the Federal Reserve will still use a bullion-friendly stimulus to increase economic growth.  During the week, bullion was down by 0.7% and faces its 2^nd weekly loss.  The metal dropped to a monthly low earlier in the trading session because safe-haven purchasing disappeared after data indicated that more jobs were added in the U.S. during November and the jobs growth is still on a slow but steady path.

However, the purchasing of gold increased as the market started to focus on negative revisions to the jobs data for October and September.  A significant decline in consumer confidence in December also increased gold prices.  Analysts also stated that the positive jobs data was not enough to eliminate the hopes of additional Fed purchasing of assets in order to lessen the effects of the potential fiscal cliff.  Spot gold increased by 0.2% at over $1700 per ounce and came from its one month low of less than $1685.

eTorians Sentiment on Gold

While indices and most eTorians in the FX space have turned to range bound, eToro commodity traders have used gold’s bottoming to pile up into buy positions at cheap prices. eToro gold traders are known for being inflation hawks.  This means that they believe in constant easing and rising inflation and have been eyeing the Federal Reserve meeting next week where the Fed could announce a new measure to stimulate the economy amid fears of a fall-out from the fiscal cliff if no solution emerges from Washington. In addition, oil traders, who have been mixed lately, have joined in with gold traders and are turning bullish on oil.  They now that expect oil contracts will surge above $90 to $91 in the near future.  Although at some point, the increased appetite for oil at eToro is more related to rising tensions in Egypt, one of the most dominant countries in the Middle East.  This outlines the changing landscape of the oil rich region which dives into uncertainly and increases the risk of a potential disruption to energy supplies.