This week, geopolitical tension has intensified. We will tell you how changes on the world scene affected the gold’s performance.
On Tuesday 1st, gold rose in price to $1,268 amid growing geopolitical tensions in North Korea and the United States. The former launched the ‘Hwaseon-14’ missile, and this rocket testing caused an increase in demand for safe assets, including gold.
Donald Trump, the US President:
“I am very disappointed in China. Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade, yet... ...they do NOTHING for us with North Korea, just talk. We will no longer allow this to continue. China could easily solve this problem!”
On Wednesday 2nd, the attention of all markets was focused on the British data concerning the index of business activity for the industrial sector and the US statistics on customer income/expenses. Vice-Chairman of the Federal Reserve Bank Stanley Fischer announced the reduction of the interest rate. The aging of the country's population, the growth of savings and the containment of investment are among the reasons.
"Transparent and robust monetary policy can strengthen confidence in the prospects for stable growth, which in turn will weaken the demand for savings and stimulate investment by pushing up interest rates. Policies aimed at stimulating productivity growth and boosting the economy in the longer term are likely to be expressed in effective measures of regulation and fiscal policy than in the actions of the Central Bank.”
Gold prices fell slightly to $1,266. The US currency strengthened its position ahead of Friday's report on employment in the country. This was affected by the signing of the law on the expansion of sanctions against the Russian Federation by the US President.
On Thursday 3rd, the market was under the influence of the report by the Institute of Supply Management of the United States. Futures cost $1,268: its value was affected by activity data in manufacturing sector. In addition, the European Commission issued a statement criticising the law signed by Trump about the expansion of sanctions.
The head of the European Commission Jean-Claude Juncker commented on Trump's actions:
"We have to take responsibility for protecting our interests, in the face of the US too, and we will do it."
On Friday 4th, the impact of ISM’s data about the activity in the US service sector increased, and the price of gold stopped at $1,268.
Federal Reserve representative Loretta Mester:
"The gradual rate raising, which the Fed signaled about for a while, is appropriate given the prospect helps to prolong economic growth."
On Monday 7th, the price of futures fell to $1,257. The decline was influenced by the strengthening of the dollar and statistics on the US labor market. Last month, there were 209,000 new job positions created. The unemployment rate fell to 4.3%, and the average wage growth accelerated to 0.3%. These indicators are high enough to stop the fall of the dollar.
Director of the National Council for Economy at the White House, Gary Cohn, said that the bill on tax reform will be ready by early autumn. He also added that the tax plan of the White House provides bonuses for US companies to return income from abroad. It is believed that with such a policy, the dollar will be reinforced. However, in general, the forecasts of international experts remain positive.
Analyst of London Capital Group Jasper Lawler:
"Gold is doing well this year, despite the Fed's rate hikes. This is due to the fact that other central banks do not tighten their policies; we are talking about the European Central Bank, the Bank of Japan and the Bank of England."
Craig Johnson, chief technical analyst in one of the oldest US investment banks Piper Jaffray predicts a weakening of the dollar. In his view, gold prices could grow to $1.3 thousand per ounce and above.
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