Gold has posted strong gains in the Wednesday session, as the metal trades at 2-week highs. Currently, spot gold is trading at $1256.32 in the North American session. On the release front, there was only one US release, as Crude Oil Inventories declined 1.8 million barrels, compared to the estimate of a decline of 2.5 million barrels. On Thursday, there are two key events – unemployment claims and the Philly Fed Manufacturing Index.
Gold has been a big winner from the ongoing political turmoil in Washington, as the Trump administration lurches from crisis to crisis. President Trump and his aides have preoccupied with damage control, as the fallout from Trump’s dismissal of FBI director James Comey continues. On Tuesday, reports swirled that Trump had asked Comey to close an investigation into ties between Russia and Trump’s former security adviser, Michael Flynn. The Democrats have been quick to attack, with some lawmakers claiming that Trump may have committed obstruction of justice. Another brewing controversy is Trump’s passing of classified intelligence to the Russian foreign minister earlier this week. Trump initially denied the claim, but has since backtracked, admitting that he did share intel with the Russians, but that he had full authority to do so. With the Trump administration busy putting out political fires, investors are growing increasingly nervous that the president’s agenda for a stimulus package and tax reform will stall, and gold, a safe-haven asset, is shining brighter as market jitters intensify.
Weak US numbers since last week have also contributed to higher gold prices, as the US economy has slowed in 2017. On Tuesday, construction data was softer than expected. Building Permits dropped to 1.23 million, short of the forecast of 1.26 million. The news wasn’t any better from Housing Starts, which slipped to 1.17 million, compared to the estimate of 1.26 million. This marked the smallest number of housing starts since November 2016. Despite the weak numbers, demand for housing remains high, fueled by a labor market that is close to capacity and an unemployment of just 4.4 percent.
