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What’s next? – GOLD 02.10.17

Oct 2 2017, 01:59 AM (CDT) | Fortfs.com

Gold futures were down in early hours on Monday as geopolitical tensions eased and as attention shifted to US employment data set for release later this week.

 

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.58 percent lower at $1,277.30 a troy ounce as of 04:45 GMT.

 

Gold ended last week in red territory as expectations for a third Fed rate hike later this year continued to grow despite downbeat inflation data from the United States.

 

The core personal consumption expenditures price index, one of Fed’s favorites inflation measures, saw a 1.3 percent growth in August, down from a previous month advance of 1.4 percent.

 

The Commerce Department said consumer spending rose by 0.1 percent last month. Consumer spending accounts for nearly two thirds of US economic activity.

 

Despite both reports fell short from originally estimated values, traders were pricing in more than a 70 percent probability for a rate move by December.

 

At this stage, Fed’s short term interest rate stands in a range between 1.00 percent and 1.25 percent after having been increased in two opportunities this year. A 25 basis points hike is expected in the near future

 

The precious metal is denominated in US dollars. Therefore, a rising interest rate environment turns into a more expensive asset for foreign investors.

 

Gold seems to be locked in a downtrend by two key factors: the continuing monetary policy normalization process and expectations for a massive tax reform in the US.

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