Spot gold is unchanged in the Monday session. In North American trade, the price of one ounce gold is $1275.49. However, gold futures have lost ground as investors have dumped safe-haven assets following the first round of the French presidential election. On the release front, there are no economic indicators out of the US. On Tuesday, the US releases two key indicators – CB Consumer Confidence and New Home Sales.
Investors cheered the results of the French election on Sunday, which sent stock markets higher but weighed on gold futures. The first round featured 11 candidates, and the election whittled the field down to just 2 candidates – centrist Emmanuel Macron and far-right Marie Le Pen. Macron garnered 24% of the vote and Le Pen 22%, which was what most polls leading up to the election predicted. Investors breathed a sigh of relief, as the nightmarish scenario of a runoff between two extreme candidates, Marie Le Pen on the right and far-left candidate Jean-Luc Mélenchon, was averted. The runoff vote between Macron and Le Pen is slated for May 7, and French voters will have a clear choice between Macron, who served as an economic minister and is pro-business, and Le Pen, who is running on a populist, anti-EU platform.
With the US economy performing well, despite some recent hiccups, the markets are expecting interest rates to continue rising in 2017. The Fed has broadly hinted that it will gradually raise rates this year, but it’s unclear how many times Janet Yellen will press the rate trigger. Most analysts are expecting two more moves this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March are likely to make the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. The Fed is unlikely to make a move in May, but June is a strong possibility. However, the odds of a June move are showing a surprising amount of volatility, and the latest CME Group reading shows the likelihood a 1/4 point hike have jumped to 58%, up from 51% earlier this week.
