Today, we will analyze the main events of the week which have had an impact on the price of gold.
On Tuesday 31st, Credit Agricole CIB FX Strategy Research experts announced a forecast concerning the US currency:
"We believe that the recovery of the dollar has reached its limits and, in the absence of new catalysts, it is unlikely that the US currency will strengthen even more."
Unexpected geopolitical risks are among the few triggers that can boost the price of gold stronger than expected.
Christopher Louney, commodity strategist at RBC Capital Markets:
“While North Korean worries seem to be on the back burner as far as gold prices are concerned, more recently the headlines around Spain and Catalonia drove some upside.”
Gold prices reached $1,271 on Tuesday.
On Wednesday 1st, the situation in Spain escalated. New elections will be held on December 21st, and Carles Puigdemont might also take part in them.
Having left Catalonia, he addressed the inhabitants of the region from Belgium:
“I ask the Catalan people to prepare for a long road. Democracy will be the foundation of our victory”.
The suspense about the new Federal Reserve governor continued. The US President Donald Trump said:
“Tomorrow, I will be announcing the new head of the Fed. I think you will be extremely impressed by this person!”
The Fed announced a decision to leave interest rates unchanged, while nothing was mentioned about a further rate increase before the end of this year. The Fed's decision implies that the labor market will grow, the economy will strengthen, and economic risks will be balanced. All this affected the dollar decline, while the price of the yellow metal stopped at $1,274.
On Thursday 2nd, ANZ bank experts explained the situation in the stock market:
“Gold prices suffered under the weight of the stronger U.S. dollar. Investors' appetites has been relatively weak as the currency has rebounded amid reports that President Donald Trump was close to announcing tax cuts. However, investors also remain cautious ahead of Trump's announcement of a new chair for the Fed, as well as their monthly interest rate meeting."
On Thursday, Donald Trump revealed the name of the new Fed head. The 64-year-old Jerome Powell is neither an economist nor a PhD, but a member of the Board of Governors of the Central Bank. The US president justified his choice saying that there must be a very strong leader to take this position.
“Powell 'has the wisdom and leadership to guide our economy.”
Gold prices that day reached $1,276.
On Friday 3rd, European stock indices rose slightly, the dollar lost its positions after the release of data on employment in the US, gold stopped at the level of $1,270.
Chief Economic Adviser at Allianz, Mohamed El-Erian:
"The Fed's embarked on this beautiful normalization: It has stopped [quantitative easing], it has raised rates, it has declared a path to reduce its balance sheet without disrupting markets and without derailing the global recovery. And I don't think anybody will want to mess with this beautiful normalization".
The dollar strengthened against the backdrop of Trump's decision on the candidacy of the Fed governor; an ounce of gold was worth $1,270.
On Monday 6th, the Head of the People's Bank of China, Zhou Xiaochuan, made a forecast of risks in the financial sector:
“China’s finance industry is undergoing a period where the ease and incidence of risk occurring is high.”
Head of the Bank of England, Mark Carney, also named the difficult period for England:
“Uncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly. And Brexit-related constraints on investment and labour supply appear to be reinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures.”
Colin Cieszynski, the Vice President of the Canadian Society of Technical Analysts, claimed that he sees potential for gold and no evidence of the yellow metal suffering from rivaling assets:
“Ultimately, gold is money.“
On Monday, an ounce of gold was worth $1,282.
According to Capital Economics, the world situation has a key influence on gold prices. Elections in France, negotiations on Brexit, tension between the United States and North Korea are among the strongest political factors that contribute to the preservation of gold positions.
Capital Economic experts:
“Heightened geopolitical risks [will] provide some support to gold prices in 2018.”
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