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What’s next? – GOLD 10.08.17

Aug 10 2017, 01:41 PM (+06) |

Gold futures retained previous gains in Asian hours on Thursday, with market participants closely monitoring the geopolitical crisis in the Korean peninsula while keeping an eye on data.

On the Comex division of the New York Mercantile Exchange, gold futures were trading 0.43 percent or $5.50 higher at $1,284.80 a troy ounce as of 06:35 GMT.

The yellow metal rose to one-week highs in the prior session as safe-havens demand spiked on the back of rising tensions between North Korea and the United States.

Kim Jong-un’s government said it was "carefully examining" a possible attack on Guam, an unincorporated territory of the US in the western Pacific Ocean. President Trump reassured that any threat to his country will be met with “fire and fury”.

But the precious metal could take a downturn if today’s producer price index exceeds analysts expectations, building a stronger case for the Federal Reserve to continue hiking interest rates.

According to Fed funds tracked by CME Group’s FedWatch tool, market players are currently pricing in a 42.5 percent probability of a third rate hike by December.

Last month, the US central bank left its short-term rates unchanged but hinted that a third rate hike this year is still possible if labor market conditions and inflation support the case.

A rising rates environment increases the opportunity cost of holding non-yielding assets such as the dollar-denominated metal, at the same time it promotes demand for the American currency.

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