Gold is down considerably in Tuesday trade. In the North American session, the spot price for an ounce of gold is $1284.70, down 0.80% on the day. On the release front, there are no major releases out of the US for a second straight day. Import Prices gained 0.7%, beating the forecast of 0.6%.On Wednesday, the focus will be on housing data, with the release of Housing Starts and Building Permits.
Gold has lost ground this week, declining about 1.5 percent. The metal has been under pressure following reports that President Trump is leaning towards nominating economist John Taylor as the new head of the Federal Reserve. Taylor is considered more hawkish on policy than the current head, Janet Yellen, whose term expires in February 2018. A more hawkish Fed could be more inclined to raise interest rates early in 2018, despite weak inflation, which would strengthen the greenback against gold. Other candidates for the Fed Chair include current Fed Governor Jerome Powell and former Fed official Kevin Warsh.
Gold prices often move higher in response to geopolitical tensions, and the simmering dispute in Catalonia could be one such trouble spot. The constitutional conflict could worsen later this week, as the Spanish government seems intent on ending Catalonia’s bid for independence. Spanish Prime Minister Rajoy has insisted there will be no talks about independence with Catalan leaders, and has threatened to disband the Catalan parliament and impose direct rule from Madrid if Catalan President Carles Puigdemont does not recant his recent declaration of independence. The deepening crisis has led hundreds of companies to start leaving Catalonia, and the Standard and Poor’s rating agency has said that the region could face a recession if the situation is not resolved. Earlier this month, Spain’s economy minister said the uncertainty caused by the crisis had led to a freeze in investment projects in Catalonia. Investors are becoming more nervous about the crisis, and if the situation deteriorates, safe-haven gold could gain ground.
